It takes Joseph C. Sternberg quite a while to get to the point in his Wall Street Journal column remarking on the Chinese leadership’s turn to considering the issue of old age pensions in China but he does, ultimately, get around to it:
No one knows if China’s debt-laden economy can survive a rotation out of the property investments that boost the prices of real estate, which in turn serves as collateral for so much corporate and personal borrowing. It’s a near-certainty the Communist Party state economy as it currently exists would not survive the introduction of the rule of law and private-sector corporate governance required to make financial markets viable destinations for retirement savings, either from the perspective of returns or investor security.
Note how improvements in rule of law and corporate governance, required and instigated by pension reforms, could also stimulate the productivity growth that will be the other indispensable part of a solution to China’s aging problem, if a solution is possible at this late date. The debate over pensions will tell us a lot about where China’s economy is headed.
The graphic at the top of this post is a population pyramid for China in 2030. Chinese demographics is something I first posted about here nearly 20 years ago when there was actually something the Chinese authorities could do about it. Now it’s far too late. In theory they could increase the number of working age Chinese people in 2040 but it’s too late to change China’s dependency ratio in 2030 other than by further decreasing the Chinese birth rate or by executing a lot of old people or letting them starve to death.
There’s a lot going on in that graphic which I’ll try to elucidate. A lot of people know about China’s “One Child Policy” which began in 1979 but fewer are aware that it was preceded by a “Two Child Policy” which in turn was preceded by an enormous jump in the Chinese birth rate during the “Great Leap Forward”. More recently the authorities have restored the “Two Child Policy” but that’s been met with mixed success. You can see all of those changes in the population pyramid.
IMO Mr. Sternberg errs in viewing China’s situation with a Western eye. China’s ruling elite are not American or even European politicians. There is an enormous gap between China’s rulers and the ordinary people and the overwhelming priority of those rulers is to retain power. I don’t know what’s going to happen in China but I doubt it will be pleasant.
While I rail on and on about financialization, I do not think China has a problem, domestically. They can simply change the financial laws. As you note, this seems unsustainable to the Western eye.
China is a feudal system masquerading as a fascist system, and eventually, China will have an innovation problem. They will be the 21st century’s Soviet Union.
They’re basically following the pattern the Soviet Union did.
IOW, if they want to strike, now’s the time.
But they’re proud of their patience, and necessarily confidant in their plan.
So I suspect that they’ll let that window of opportunity pass them by.
Adolf Hitler would move now, on all fronts, and force the Norks to do the same.