Author: Eamonn Sheridan

Roy Smith was a Goldman Sachs Group Inc. partner when he wrote a column saying Japan's rise as a financial hegemon was done now says "The vulnerabilities in China today are very similar to the vulnerabilities in Japan"

Smith is now a finance professor at New York University's Stern School of Business:

He cites the China risks:

  • bad loans
  • overpriced stocks
  • frothy property market

Saying they are flashing danger for China's economy and putting pressure on a fragile financial system -- similar to conditions that triggered Japan's fall

Further parallels:

  • Aging population
  • Mounting pension and health-care costs

Smith says that while China will probably avoid prolonged Japan-style stagnation, a major crisis could expose weaknesses that aren't apparent now.

"Most people today are talking about China displacing the United States as the great power of the 21st century ... My view is that it is more likely to end up like Japan -- that is, the status of a former would-be superpower that isn't"

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