What must China do to avoid a Japan-type recession? Economist Richard Koo adds up why ‘the Chinese situation is far more serious’

by Frank Chen at scmp.com
With China’s never-before-seen levels of economic upheaval, Koo warns ‘the consequences could be dire’ if a so-called balance-sheet recession takes hold Koo’s theories influenced Western policy after the global financial crisis, and now he has strong advice for Chinese policymakers and disillusioned young people

Richard Koo, chief economist at the Nomura Research Institute, has advised several Japanese prime ministers on economic issues. He is known for elaborating on the notion of a “balance-sheet recession” and explaining how it led to Japan’s so-called Great Recession. This interview first appeared in SCMP Plus. For our complete Open Questions series, click here.
Whereas a typical recession is considered to be a natural result of fluctuations in the business cycle, a balance-sheet recession is characterised by high levels of private-sector debt that lead to increased saving, which in turn results in an economic slowdown – because of reduced household consumption and declining business investment.