Bai Chongen is a prominent Chinese economist and government adviser. He is the dean of Tsinghua University’s School of Economics and Management and serves concurrently as vice-chairman of the All-China Federation of Industry and Commerce. From 2015 to 2018, he was a member of the Chinese central bank’s monetary policy committee.

Here, he discusses how China can avoid “Japanification”, what Beijing can do to help cultivate the next Elon Musk, and why the “China shock 2.0” phenomenon is often misunderstood.

This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.

Many are drawing parallels between China’s current economic malaise – a real estate crisis, stagnant consumer prices, a shaky job market – and Japan’s “lost decades”. How do the situations compare?

The fundamental difference is our stage of development. We are still a middle-income country; Japan was already a fully developed, high-income economy when its bubble burst. China still possesses massive headroom for growth.

And Chinese enterprises exhibit tremendous drive and capacity. Japan was highly innovative too, but it has struggled with commercialisation in recent years – translating that innovation into marketable products. That is exactly what China excels at.

We are a demographic behemoth. Japan is not small, but our population is more than 10 times larger. In a megamarket, innovation yields significantly higher returns and commercialising technology generates greater economies of scale.