China has to stabilize its housing market and address risks to its economy if it wants to avoid 'Japanification', JPMorgan says
China could soon resemble the slow-growth, financially-stagnating Japan of the 1990s if it doesn't address its economic challenges soon, according to JPMorgan.
China today presents certain similarities, according to JPMorgan. Its housing sector has corrected since 2021 structurally and cyclically, the strategists said, reflecting changing supply and demand dynamics — which Japan also faced during its housing correction three decades ago. But China's demographics are actually worse, given that its population aging is happening at a steeper rate.The strategists also highlighted that China's GDP per capita — $12,800 in 2022 — is much lower than Japan's $29,470 from 1991. While this can imply more potential for growth, it also indicates the country is on pace to get older and more indebted before it gets rich, in JPMorgan's view.
To be sure, China still has some factors working in its favor, including its comparably lower urbanization rate, which suggests a larger potential for productivity increases and room for more housing demand. And the Chinese housing sector, for all its uncertainty, doesn't look as overvalued as Japan's once was, according to JPMorgan.
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