China today differs from Japan in 1980s

Big differences
Among the distinctions: Japan's equity-market capitalization amounted to 41 percent of the world's total market capitalization in 1989; by contrast, China's equity markets currently account for only 0.5 percent of the value of global equity markets.

He also notes that China has a much more outward-looking growth and development model than Japan. In 2004, exports and imports combined equaled 74 percent of Chinese GDP, more than three times Japan's 23 percent share.

That is why Chinese currency reforms take on much greater importance, Roach said, pointing out that the Chinese might have learned from the Japanese to resist U.S.-led political pressure for currency revaluation. Japan ran into trouble in the late 1980s, in part by abdicating control over the yen and letting the dollar-yen conversion soar from 259 in 1985 to 121 by the end of 1987. Many blame that for setting the stage for an asset bubble that eventually collapsed in Japan.

"The last thing China wants is to go down that road — placating U.S. politicians on the currency front while, at the same time, sowing the seeds of an increasingly dangerous liquidity bubble of its own," Roach said.

There are also significant political differences between the two. While the Chinese have been more open to foreign investment than Japan, there are some concerns that the communist political structure means that the Chinese won't embrace all kinds of foreign involvement such as an American company buying a big Chinese company.

In addition, Standard & Poor's chief economist David Wyss points out that China's huge population — which he estimates is 10 times as large as Japan's — means that China has the capability of taking over world production of just about everything.

So talking about China today as though it were Japan 20 years ago might not accurately size up the situation of this fast-growing empire. China's might just be beginning to build its power as an economic force.

To the dismay of many Americans, that will likely mean a bigger, bolder China to contend with for many years to come.

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