In his latest column for the Wall Street Journal William Galston muses about whether the world has already seen “peak China”:
Long-term projections suggest that China’s population, which now stands at about 1.4 billion, will drop below one billion by 2080 and 800 million by 2100. China’s working-age population, which peaked in 2011, is projected to decline nearly a quarter by 2050. Meanwhile, the number of elderly Chinese will rise from 200 million to 500 million at midcentury, and providing for their needs will be a mounting challenge for China’s workers and policy makers.
While these demographic trends will cause issues in the future, current problems are challenging the playbook that China has used to maintain growth in recent decades—infrastructure development, housing production and exports.
Burdened by rising debt, local governments are finding it difficult to sustain their current pace of infrastructure investment. Meanwhile, China’s housing sector looks desperate. Dozens of developers have defaulted on bonds and other financial obligations in the past two years. Last week, Country Garden, one of China’s largest remaining developers, missed interest payments on debt with a face value of $1 billion, sending new shock waves through the sector. The monthly value of new home sales by China’s 100 largest property developers has fallen more than 80% since late 2020. Looking forward, annual housing demand is estimated at between nine million and 10 million units, well below the peak (much of it speculative) of 14 million purchases in 2021.
Let’s visualize China’s demographic situation a little more:
With the regular caveat that we’re working in the dark, relying on China’s reported population which may or may not be correct, I think that population pyramid is revealing.
The major change occurred about 30 years ago, I would assume due to a combination of the “One Child Policy” with China’s currency revision which led to the growth spurt that seems to have come to an end. Jobs became more available and lucrative, particularly for women of child-bearing age; children became an economic liability.
That will really begin to bite in about 30 years, i.e. around 2050. China’s dependency ratio will be unworkable with little way around it unless you’re willing to kill a lot of old people, a move that may prove difficult if there’s anything left of filial piety in that China. A relatively small number of working age Chinese will be trying to support a very large number of older Chinese.
Sorry to be the dim bulb, but what does bankruptcy or foreclosure mean in a dictatorship?
To me, just a decision by those who have the guns to reallocate assets, Yuan , Dollars, whatever.
More assets can always be created by fiat for whatever they believe they want to do.
More I think about that, what’s the difference between them and us?
The yuan has been loosely pegged to the dollar for thirty years.
Peak population, probably yes. Peak economic and/or military power, No.
Their economy is one-third larger than ours, and increasing its lead, and its manufacturing sector is 50% larger, and rapidly increasing its lead. They are optimizing manufacturing and transportation with AI/5G. They already have 80% of the 5G base stations in the world, and they have two-thirds of all the high-speed rail trackage in the world. They graduate more engineers and scientists than the rest of the world combined. Curiously, as David Goldman points out, they also graduate more classically trained musicians (in the Euro tradition) than the rest of the world combined.
Japan has had a declining population for several years now, but they seem to be managing it. Both population and GDP can decline, but if the per caput GDP remains steady, there is no real problem.
As usual with him, Galston is oblivious to what’s happening in Europe and the US. Europe’s native population has birth rates well below replacement, as low as 1.0 to 1.4 in most EU countries. They have combined that with lunatic carbon dioxide reductions that will not only deindustrialize Europe, they will also shut down a substantial fraction of EU agriculture. Depopulation by starvation is on the agenda, as well as lack of births. And don’t laugh at them. the US DoE and EPA are adopting regulations that will shut down 60% of the electricity generating capacity in the US, without any replacement, and end the manufacture of IC cars and trucks, again with no replacements.
If you want to know just how insane and out of touch our Ruling Caste is, just read Galston, Meade, and, sadly, nowadays, Victor Davis Hanson. All reliable mouths for our very own little Saurons.
The one child policy was the ultimate form of borrowing from the future — and the bill is coming due.
I don’t know about if the dependency ratio is unworkable. As ever, Japan leads the way in dependency ratios that are incredible and how a society can adjust.
Son-in-law, an engineer, is working in China running a production plant there and a design team of engineers. Based on his experience we have little to fear from Chinese engineers.
Steve
Steve, China has 10 times as many engineers and scientists as we do. 10 times. Numbers count. The US is going to be a second tier power.
PS Russia, with 40% of our population has as many engineers and scientists as we do, and they are better trained. Our country is not in decline, it is in collapse. And no one in power knows it.
As long as our real per capita production and per capita income rise while we increase our income equality and our distinctive freedoms, I don’t care whether we’re the preeminent global power or a second tier power, at least in part because I don’t believe in maintaining an American empire. I have no idea how those who do believe in American empire plan to accomplish American hegemony as the financialization of the U. S. economy increases and our real production decreases.
Curious Onlooker:
I think the differences between China and Japan are sufficient that they aren’t easily comparable. Example: income inequality.
I agree and disagree.
Dependency ratios will improve economic growth over the baseline if they are favorable, or act as a drag if they are unfavorable. The theory of how they work implies it is independent of income level or distribution.
My claim was it is possible for China to adjust; not that it will adjust. The things in its favor is its easier to copy then to lead; and Japan has shown a path. The things in its disfavor is some aspects of Japan’s adaptation are hard to emulate — being under US military protection and keeping military spending at < 1% GDP as an example.
PS : If we are going to use anecdotes, I will state some of the best and most creative engineers I know are Chinese.
Me, too. IMO the biggest impediment to science and technology in China isn’t talent but their government.
I said the same thing 20 years ago. I’m less confident now. I think the CCP will actively prevent the necessary adjustments.