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Could China’s economy face the same problems as 1980s Japan?

A leading organisation has warned that China could soon face the same problems that Japan had at the end of the 20th century, hedge fund managers may be concerned to discover.

A leading organisation has warned that China could soon face the same problems that Japan had at the end of the 20th century, hedge fund managers may be concerned to discover.

Ted Scott, director of UK strategy at F&C Investments, has highlighted an explosion in credit during the 1980s as creating an asset bubble, suggesting that modern-day China could be facing this problem now.

He also emphasises the countries’ reliance on exports to keep their economies healthy, although it is important to note that China is an emerging market so the conditions are not identical.

Mr Scott concluded that a stronger renminbi is likely to allow the economy to rebalance, with strong stewardship potentially protecting the country from a slump similar to Japan’s.

Earlier this month, the JPMorgan Chinese Investment Trust predicted that the Chinese market would experience strong growth over the next 12 months, offering hedge funds strong gains from its equity markets.

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