China Will End Up Like Japan, Says Observer Who Called It in 1990

Forecasts for China to surpass the U.S. as the world’s main economic power are misplaced. So says an observer who foresaw Japan’s eventual demise a year before its land-price bubble began to burst.

“The vulnerabilities in China today are very similar to the vulnerabilities in Japan,” said Roy Smith, 76, who was a Goldman Sachs Group Inc. partner when he wrote a column saying Japan’s rise as a financial hegemon was done. “Nobody agrees with me. But they didn’t agree with me in 1990, so at least I have one right.”

Among the risks: bad loans, overpriced stocks and a frothy property market are flashing danger for China’s economy and putting pressure on a fragile financial system -- similar to conditions that triggered Japan’s fall, said Smith, a finance professor at New York University’s Stern School of Business. A further parallel is the burden of an aging population, with mounting pension and health-care costs, he says. 

http://finance.yahoo.com/news/video-china-end-japan-says-064531498.html