China Entering Demographic Danger Zone, BOJ Official Says

PATRICK HARRINGTON writes at BLOOMBERG BUSINESSWEEK:

China is entering a “danger zone”where a financial crisis may become more likely because of increases in loans and property prices coinciding with an aging of the population, a Bank of Japan (8301) official said.

“If a demographic change, a property-price bubble, and a steep increase in loans coincide, then a financial crisis seems more likely,” BOJ Deputy Governor Kiyohiko Nishimura said in a speech for a conference in Sydney, posted on the central bank’s website today. “And China is now entering the danger zone.”

China is at risk of emulating crises in Japan in the 1990s and the U.S. in the 2000s, according to Nishimura, who cited a Chinese working-age population that is “close” to peaking as a proportion of the total. Demographic changes can provide fertile ground for “malign property bubbles” because of the effect on demand for real estate, he said. READ MORE.

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