China May Soon Go the Way of Japan, Says Merrill Lynch

A Chinese investor looks at prices of shares at a stock brokerage house in Fuyang city, east China's Zhejiang province on Aug. 28 Zhejiang province on Aug. 28 Photograph by Imaginechina via AP Photo

China is weaker than it appears and “may be entering into an asset-deflation phase” like Japan’s, says a report today by two analysts at Bank of America Merrill Lynch. China has vaulted ahead of Japan to become the world’s second-largest economy after the U.S. But like Japan, says the Merrill Lynch report, China is marked by “imbalanced growth, government stimulus, overcapacity, an overwrought housing market, and a severely under-capitalized financial system.”

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