On August 11, 2023, the Institute of International and Strategic Studies (IISS), Peking University (PKU) hosted the lecture series under the 65th North Pavilion Seminar. Richard Koo, Chief Economist at Nomura Research Institute, delivered a lecture titled "Chinese Economic Challenges Today Versus Japanese Economic Challenges 30 Years Ago." The lecture was chaired by Prof. Yu Tiejun, President of IISS, PKU.

Dr. Richard Koo began with reviewing the experience and lessons learned from Japan's economic bubble period. He pointed out that due to the rapid rise of prices in commercial real estate in the 1980s, Japan underwent a bubble economy collapse in 1991 that caused devastating losses. Businesses had debts far exceeding their assets and had to use cash flow to repay debts so as to prevent bankruptcy. Despite zero interest rates, companies were unwilling to invest funds to develop new products, thereby losing competitiveness on international market. To prevent economic collapse, the Japanese government tried to maintain balance sheet stability through massive budget deficits. However, the Japanese government did not fully recognize the role of fiscal stimulus, prolonging the entire balance- sheet recession process by at least ten years.

Dr. Richard Koo then compared the rising trends in real estate prices in Japan and China. He opined that China might also experience a burst of real estate bubble, thus leading to a balance sheet recession. However, the Chinese government has the capability to implement strong fiscal policies to prevent a major economic downturn. At the same time, he was concerned about the impact on corporate borrowing and investment from issues like the large proportion of the construction industry in China's GDP, high fiscal deficit levels, decoupling from the U.S., the middle-income trap, population shrinkage, and economic weakness caused by COVID-19, which might make the complexity of China's challenges in 2023 far exceed those faced by Japan in 1990.

During the Q&A session, Dr. Richard Koo engaged in discussions and exchanges with the audience on topics, such as the role of export trading companies in Japan's decline, Chinese government policies on corporate debt, the impact of savings levels on balance sheet recession, the reasons for Japan's overseas investment in establishment of manufacturing facilities, and the treatment of foreign workers in Japan. (Contributed by: Ma Li’ao)

(Editor: Li Fangqi, Photographer: Zheng Peijie)