By Zachary Keck
It’s well established that we are living in the Asian Century. Just what the Asian Century will look like is open to debate.
In my view, Asia faces two possible divergent futures, both of which are tied to the trajectory of the Chinese economy. In the first scenario, China’s economy enters into a period of prolonged stagnation or even negative growth rates. In many ways, this is the most likely scenario. China’s economic miracle has been fueled by repressing household income in order to free up capital for state-driven investment.
China is hardly the first country to adopt this model, although the degree with which it has sacrificed household income for state-led investment is unprecedented in scale. As Peking University’s Michael Pettis has pointed out, every country that has pursued this model in the past—including Germany in the 1930s, Brazil and the Soviet Union in the middle part of the twentieth century, and Japan a few years later—has witnessed a period of rapid economic growth followed by prolonged stagnation or crisis. There is good reason to expect the same from the Chinese economy in the years ahead.
Source: nationalinterest.org
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