Yao Yang on Avoiding a Japan-style "Two Lost Decades" (Part 2)

"I believe one reason scholars are so often looked down upon today is that many have lost their independence — they spend their time acting as cheerleaders for the government." — Yao Yang

This is our second instalment of Yao Yang’s candid assessment of the state of China’s economy and the measures needed to fix its problems.

In part one, Yao struck a relatively optimistic note, pointing to modest but perceptible signs of loosening constraints in China’s economy and society—albeit within a continuing era of policy “correction” and cut-throat economic competition.

Here, he turns to the more intractable challenges: weak demand, the collapse of the property sector and the crisis in local government finance—warning that, unless the central government rises to the occasion, China risks a Japan-style “two lost decades”.

— James Farquharson

Key Points

1. Scholars are held in low regard because they act as “cheerleaders for the government” instead of confronting genuine problems. Their reluctance to acknowledge the central importance of China’s real estate sector is telling.

2. The fact is, local government spending and real estate represent around 50 per cent of total demand in China. Fa…