China's determination to avoid a recession and deflation

On March 9, Chinese regulators are moving from Japan economic history lesson, determined to avoid a repeat of Japan prevailed in recession and deflation. These issues over the past 20 years has troubled Japan.

According to the Japan Government, as well as other source who had direct contact with Chinese regulators, Beijing believes that Japan release the liberalization of capital flows and currency for more than 30 years ago, is leading Japan asset bubble forming in early 1990 and cracked a key factor.

"They told Japan's successful experience is not interested in, is the greatest concern of Japan committed a mistake," one source told Reuters in China. Japan and China does have many similarities, so I don't think (China) can learn a lot from our experiences. ”

Policy makers and think-tank analysts are well aware of the Government of China Japan and experience in other countries, the source said, even in 2012 when territorial disputes led to the Sino-Japanese diplomatic relations cooled, Governments as well as civil aspects of bilateral exchanges without interruption.

With economic growth slowing and signs of deflation, China Japan marked increase in interest in policy details.

At the opening meeting of the national people's Congress on Thursday, the Chinese Government announced that this year's economic growth target of about 7% in 2014, down from 7.4%, and the slowest pace for 24 years. China's ongoing Japan the past three decades has been the key financial reform: the interest rate liberalization, internationalization of currency and capital account liberalisation.

These reforms should contribute to the development of the economy, but if the errors may result in serious consequences.

Chinese policy makers believe that Japan and the Western powers agreed in 1985 's Plaza accord on Japan is a key event, eventually led the country then in 20 years of deflation. The agreement effectively allowed in 1980 and 1990 allow the yen to rise and open capital accounts.

Days after the signing of the agreement surged, hit Japan's main export industries, for example, Japan Automobile manufacturers began to produce more relocated overseas. It's starting to hurt economic growth, Japan's Central Bank had to ease monetary policy.

However, funds raised by loose monetary policy, together with overseas placements, flow to the stock market, real estate and other asset classes, and often through the leverage effect that these funds further.

"The Chinese are learning from Japan's experience. Even though economic growth is slowing, Chinese policymakers are also not taking those policy initiatives that could increase financial imbalances. They do it very wise, "Japan's Central Bank Board Member muneidengying held in maebashi city, North of Tokyo, on Thursday said at a press conference.

He said that while asset bubbles are formed that year, Japan's Central Bank has not tightened monetary policy, because this will affect Japan's biggest trading partner--United States.

"Japan is one of the lessons learned: policy makers give priority to domestic economic stability should be achieved (International cannot be taken into account in the first place)," wooden neidengying said.

China also faces other Japan faced similar challenges.

Because of tighter government policies to prevent overheating and excess supply, China's real estate market has cooled. The problem with the economy slowing, concern over the rapid increase in the banks ' bad debts, and further weakens local finances.

Regulators have also been asking Japan is how to deal with bank failures, this may indicate that Beijing is prepared to respond to liberalization of interest rates is relatively fragmented banking possible consolidation.

"They looked at Japan, rather than other countries, is very wise, because the financial system is very similar," another source said in Shanghai.

Like Japan, China corporate finance is highly dependent on bank loans rather than debt or equity financing. In addition, China has tightly regulated banking industry, for example, limits the number of branch locations, and Japan in 1970 's and 1980 's approach is like.http://www.sinotrailer.net/newsshow341.html