CHINESE regulators are turning to Japan for lessons on economic history, determined to keep the world’s second biggest economy from taking the same path of recession and deflation that has blighted its neighbor for the past 20 years.

    Beijing views Tokyo’s handling of the liberalization of capital flows and the yen over 30 years ago as key factors that led to the creation and subsequent bust of the asset bubble in Japan in the early 1990s, according to Japanese government and other sources who are in direct contact with Chinese regulators.

    “Japanese and Chinese economies do share many similarities, so I assume there is quite a lot to learn from our experiences,” one China-based source who is directly in touch with Chinese regulators told Reuters on the condition of anonymity.

    Chinese policymakers and analysts at government think tanks are already well versed in the experiences of Japan and other countries, and the sources say two-way communication at both government and private-sector level continued even through a chill in diplomatic ties after a territorial spat in 2012.

    But as economic growth slows and signs of deflation emerge, China’s interest in Japan has increased notably around policy details, according to the sources.

    At an annual parliamentary meeting that began Thursday, China announced an economic growth target of around 7 percent for this year, down from 7.4 percent in 2014, already the slowest in 24 years.

    China is carrying out three key financial reforms Japan undertook over the past decades — liberalizing interest rates, internationalizing its currency and opening up its capital account.

    These reforms should help develop the economy, but mis-steps could have huge repercussions.

    Chinese policymakers see the 1985 Plaza Accord between Japan and the Western powers, which effectively approved a stronger yen and the opening up of the capital account during the 1980s and 1990s, as pivotal events for Tokyo which ultimately led to Japan’s “lost two decades,” sources say.

    The surge in the yen that followed the agreement hit the country’s main exports; Japanese automakers, for example, started shifting more production overseas. This started to hamper economic growth and prompted the Bank of Japan to ease monetary policy.

    However, much of the cash from the easing, along with hot foreign money that followed the liberalization of the capital account, flowed into stocks, property and other assets, often magnified through leveraging.

    “China is already applying lessons from Japan’s experience. Even when growth is slowing, Chinese policymakers aren’t taking policy measures that could heighten financial imbalances. That’s very wise of them,” Bank of Japan board member Takahide Kiuchi told a news conference in Maebashi, north of Tokyo, on Thursday.

    He said that even when asset bubbles were forming, Japan wasn’t able to tighten monetary policy because of the impacts it would have on the United States, its biggest partner.

    “One of the lessons from Japan’s experience is that achieving domestic economic stability should be the top priority for policymakers (rather than international considerations),” Kiuchi added.(SD-Agencies)