China Suffers "Delusion" like 1980s Japan, Faces Long Stagnation: Expert

China's current delusion resembles what he saw in Tokyo in the late 1980s when the nation was going through an economic bubble, which eventually burst in the 1990s. Most of Japan's growing credits were held domestically, just like today's credits in China, he said, and this is another reason why he believed that what awaits China is most likely long-lasting economic stagnation.

Economic reform will likely remain a focus of the Chinese government, but there are so many conflicting interests in the economy that Jerram sees the government's willingness to tackle real reform as low. "I don't know if it's really possible," he said. Even if President Xi Jinping were given another 15 years, "I still don't know if you can fix it."''

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This theory -- a long hard stagnation as a result of the debt boom rather than a sudden debt meltdown -- is not universally shared. For example, the New York Fed was somewhat less sanguine about the chances of China being able to avoid a "Financial Crisis," though it also thought that the government had some capacity "to absorb potential losses from a financial disruption."