Time and again, both the media as well as social media are found to be overtly burdened with news, videos, clippings, and pictures about subtle and dazzling inventions of AI-generated technologies by Chinese companies and scientists, now and then, apart from additional well-founded misgivings about the mass dumping of AI-generated products of all hues into the world market, thus heavily hurting the domestic industries of most nations. The said two topics are soundly based without any iota of doubt, along with the foreseeable planned intention and yearning of Chinese leadership to dominate the world in every aspect, just like the USA in the last 80 years.
Now, in this present scenario, particularly on economic and governance issues, many analysts of repute, including our homegrown ones, are full of praise and applause for China on economic policy matters but are equally adverse and skeptical about the future of the Indian economy.
With the recent news about the Chinese economy going into deflation, the famous English saying “HISTORY REPEATS” comes to mind, foreseeing that the Chinese economy has started to show the unfaltering signs of the famous JAPANESE SYNDROME of the 1980s in the financial sphere. Now, the most pertinent question is: What is the Japanese Syndrome, and why is it relevant to the Chinese economy? The famous JAPANESE SYNDROME, as popularly coined in world economic circles in the early 1980s, refers to the sudden nosedive of Japan’s fairy-tale financial and technological growth, which was far higher in stature than that of China at present from the 1960s onwards, but suddenly nosedived in the very beginning of the 1980s with the same Chinese economic symptom of deflation, from whose grave clutches Japan’s economy is still not fully recovered.
In the 1970s and early 1980s, Japan’s financial and technological growth was miles ahead of the rest of the world, and the first serious experiments with robotics in the world started in Japanese hands. Japan’s growing clout over the world was so significant that even its all-weather friend, the USA, started to fear being swayed by Japanese dominance. The most justified fear was not only found in Americans’ sagging confidence but also caught the imagination of contemporary great Hollywood movie makers, who gave birth to some of the finest fictional movies about the reality of the USA under Japanese rule. But then the Miltonic grand fall came for Japan.
Now, the Chinese economy is suffering in the same way and facing doom due to striking sequential similarities with Japan’s economic trajectory in the 1970s and 1980s. In the 1970s, Japan’s economy, highly buoyant due to exponential growth in exports, was brimming with insurmountable wealth co-shared by the corporate sector, the government, and the general public. The immediate effect of said prosperity found its path to massive investments in domestic and overseas stocks and in real estate, coupled with generous infrastructural credits to various nations in the interest of Japanese companies. However, this export boom suffered a twin shock: steep competition from Chinese, German, and other rising economies like South Korea, India, etc., in the international market, and, on the other hand, similar high tariff barriers that China faces today from other nations to protect their domestic industries from dumping of Japanese goods. Apart from this, a growing recession in the world market contributed to recurring loan defaults by many poor nations, propelling Japan’s downfall. As a result, Japan’s booming stock market, as well as the real estate sector, fell like a pack of cards, and Japanese banks struggled severely with both domestic and international bad loan debts.
Now, Chinese economic stories look to be scripted in stark similarity to Japan’s in the 1980s. The same boom in exports, mesmerizing technological and real estate growth, buoyant stock markets, massive national prosperity, billion-dollar investments, and loans in foreign projects and nations are closely followed by tariff safeguards from overseas, massive defaults on bank loans both domestically and internationally, stagnancy in job and wage growth, and now deflation in the ultimate.
Now, another question arises: Can China recover from its setback? Once again, the great Japanese Syndrome comes into play. Like Japan, China never stressed service exports, unlike India, which earns significant revenue through IT and legal service exports. Both nations have a common cause of perennial weakness and a serious lack of cultivation of English, the heart of IT and legal services. India has exploited the full potential of this massive untrodden export sector. Due to the highly commendable performance of Indian companies and workers, the roots of Indian IT and legal industries are stoutly spread in every corner of the world with an invincible position, irrespective of the slowdown in the world economy. Therefore, India is the only nation in the world that will weather the impending financial storm very smartly, in contrast to the goods-oriented exporting nations.
China is left wandering to recuperate its troubled goods export market, and the consequential staging of inventories in ports and warehouses will have a deadly effect on Chinese manufacturing industries, the job market, personal finances, and commensurate fast falling of banks. To save these banks, the Chinese government would have to blank its hard-earned export revenues of the last 30 years.
Now, the next issue is whether China is literally so strong in the digital and AI world. The answer is that China is totally devoid of the basic technological know-how, such as chip-making machines and other critical ancillary gadgets and semiconductor ecosystems—the foundation of any AI or digital system. It is still poorly dependent on the USA, the Netherlands, the UK, Finland, and Japan for cameras and other crucial technologies. Very soon, it may knock on India’s door for its fast-growing ecosystem in chip-making and semiconductor industries. The very hollowness of both China’s economy and technological base is a well-known fact. Even on the AI issue, in core robotics technology, it is miles behind Japan in reality. Japan is simply gauging China’s utmost capacity in AI with patience before shaking the world with its hidden and concealed robotics technology.
So, India, Japan, and Europe will dominate both the economy and AI in the very near future—not China.
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