Zhou Xiaochuan, the former People's Bank of China governor, has highlighted the dangers of excessive debt in the economy. Photo: AFP

When Zhou Xiaochuan speaks, Beijing listens. The former People’s Bank of China governor has a reputation as a reformer and a pragmatist.

Feted in the world’s second-largest economy, he raised a few eyebrows in London earlier this week when he warned that China must learn the lessons from Japan’s lost decade of economic stagnation in the 1990s.

“Japan had very fast development and later a so-called lost decade,” Zhou said in a speech at Chatham House, the influential foreign affairs organization. “The Chinese economy may have a similar over-leveraged problem, and we need to absorb the knowledge and lessons from what happened.”

His remarks are certain to resonate in Beijing.

During a record 15-year tenure at China’s central bank, he helped steer the country through the Global Financial Crisis of 2009 and the resulting Great Recession, which swept through the United States and the rest of the West.

Zhou finally stepped down last year, but he has continued to highlight the dangers of excessive debt in a cooling economy and the prolonged trade war between Beijing and Washington.

Data released in the past few weeks have shown that car sales dropped by 13.8% last month compared to the same period in 2018.

Trade dollar-denominated exports also plunged 20.7% during the same timeframe while smartphone shipments dipped as consumer spending tightened.

Still, Zhou expressed confidence in the economic fundamentals, echoing Beijing’s line.

He then went on to confirm that financial sector reforms would continue as China’s vast market is further opened up to foreign investors.

“After so many years, China is more confident to have further reforms and [an] open-door policy,” he said while acknowledging that the pace of the process has at times been glacier-like slow.”

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