[BRIEF NOTE] Chinese population futures and the economy
Over at Demography Matters, my co-bloggers Edward Hugh and Claus Vistesen have produced a couple of interesting pieces on how China's unique demographics will impact Chinese economic growth. Edward in "China's Inflation and Labour Shortage Problem, It's The Fertility Stupid!" outlines how, in the face of a growing shortage of young workers with consequent rising wages feeding into price increases labour shortage, inflation is rising and might create an unmanageable situation.
Obviously China can still get considerable growth by relocating the existing workforce across sectors to more productive ones. But the end of the labour intensive low economic value growth must now surely be in sight, and the big question is can China sustain inflation-free growth of the order of magnitude we have been seeing in recent years, bearing in mind that much of the recent growth in many of the higher growth developed economies - the US, the UK, Ireland, Spain - has been very labour intensive. My feeling is that it can't, this is why all those exhausted canaries swooning in Latvia have been so useful, and that we will see a slowdown in China which will not simply be cyclical, but rather structural. Possibly the moment of inflection (or tipping point) here will come around the time of the Olympic Games.
Elsewhere, Claus in "China's Demography and Economic Development" examined how the cohorts of young Chinese are steadily shrinking, thanks to several decades of below-replacement fertility triggered by China's one-child policy and the natural fertility decline evidenced by increasingly educated and urbanized populations around the world. China may be at serious risk of facing with central and eastern Europe, trying desperately to move desperately up the value chain beyond labor-intensive products while avoiding the large-scale emigration of Chinese workers to other countries. He worries that the consequences of this for the global economy could be severe given China's very high and growing profile in the international economy.
Obviously China can still get considerable growth by relocating the existing workforce across sectors to more productive ones. But the end of the labour intensive low economic value growth must now surely be in sight, and the big question is can China sustain inflation-free growth of the order of magnitude we have been seeing in recent years, bearing in mind that much of the recent growth in many of the higher growth developed economies - the US, the UK, Ireland, Spain - has been very labour intensive. My feeling is that it can't, this is why all those exhausted canaries swooning in Latvia have been so useful, and that we will see a slowdown in China which will not simply be cyclical, but rather structural. Possibly the moment of inflection (or tipping point) here will come around the time of the Olympic Games.
Elsewhere, Claus in "China's Demography and Economic Development" examined how the cohorts of young Chinese are steadily shrinking, thanks to several decades of below-replacement fertility triggered by China's one-child policy and the natural fertility decline evidenced by increasingly educated and urbanized populations around the world. China may be at serious risk of facing with central and eastern Europe, trying desperately to move desperately up the value chain beyond labor-intensive products while avoiding the large-scale emigration of Chinese workers to other countries. He worries that the consequences of this for the global economy could be severe given China's very high and growing profile in the international economy.