Global liquor industry giant’s chief executive warned that China’s economy may soon follow in the footsteps of Japan’s “lost three decades” and face the possibility of a “lost decade”.
Japanese food and beverage manufacturer, Suntory’s chief executive officer, Takeshi Niinami, expressed during an interview with Yahoo Finance, “We are currently at a turning point in China.”
He cautioned that economically, Japan went through decades of deflation, and China might soon follow suit.
Suntory, maker of globally renowned Japanese whisky brands such as Yamazaki and Hakushu.
“The deflation in China is very similar to what we (Japan) experienced,” Niinami stated at Suntory’s New York headquarters, “The key issue is that people have money but are unwilling to spend it, and there is oversupply.”
Japan’s economic bubble burst in the early 1990s, leading to over three decades of deflation. Even near-zero interest rates failed to stimulate economic growth.
This spring, Niinami published a column in the Financial Times likening deflation to an “invisible monster”.
Only recently has Japan shown signs of economic revival amid improving consumption, with a 0.8% quarter-on-quarter increase in domestic production for the second quarter.
China has recently faced unprecedented economic pressures, including insufficient consumption, declining corporate earnings, falling real estate prices, dwindling local government fiscal revenues, rising youth unemployment, aging population, incomplete social security system, and the seasonal year-end accounting pressure, which could trigger a widespread debt crisis.
The biggest issue is China’s weak consumer spending, with individuals refraining from spending money and taking out loans to make purchases for a considerable period. China’s GDP grew by 4.7% year-on-year in the second quarter, lower than the expected 5.1%.
Companies like Nike and Levi’s are warning about facing more challenges in their operations in China.
Niinami suggested that Beijing should encourage the private sector to take risks and innovate.
“China should establish mechanisms to reward entrepreneurial spirit among businesses and individuals, to create an economy led by private enterprises rather than state-owned enterprises,” he added.
In January, Niinami mentioned at the Reuters Global Market Forum (GMF) in Davos that Suntory intends to make “more” investments in the Indian market, while also considering the possibility of constructing new factories and acquiring existing companies.
Nevertheless, Suntory does not plan to completely abandon the Chinese market. “We will maintain our current level until inflation returns to moderate levels,” he said, “In the next 10 to 20 years, China may return to inflation levels.”