There’s an old apothegm: “History does not repeat itself but it does rhyme”. It’s at least fifty years old but certainly not 100.
In a piece at The Economist Jamie Powell hears a rhyme of Japan in China. The graph above illustrating China’s birth and death rates is sampled from the piece. As you can see the birth rate and death rate cross in 2022, i.e. China’s population peaks then. He observes:
We don’t want to get ahead of ourselves, but it’s all beginning to feel a little like Japan in 1989 isn’t it? A rapidly deflating property bubble fuelled by debt. Tick. Stocks massively underperforming foreign counterparts. Tick. And now, potentially, a population materially declining in size. Tick. Arguably, the only thing missing is a legion of highly profitable businesses — Toyota, Sony, Honda, Nintendo — beginning to accrue excess savings at the expense of its workers.
At this pace, we wouldn’t be surprised if the People’s Bank of China begins cutting rates much faster than the Bank of Japan did in the 1990s. Macro bears have long expected Western economies to get trapped into Japanification. China might beat them to the punch.
I have been commenting on this for nearly 20 years now. I, along with many others, thought peak China population would occur somewhat later. I’m also unsure as to how much credence we can put into China’s reported birth and death rates.
A couple of observations of my own. China’s net migration rate is -0.252 per 1,000, i.e. more people are leaving China than coming in. Also, with respect to Mr. Powell’s observation about immigration:
If your workforce can count on the young, the marginalised or immigrants joining in greater number than those leaving it, your economy is in a pretty sweet spot.
I think that needs some qualification. Immigration is only good for a country if the productivity of those entering or leaving the country increases the median productivity. And regarding this:
Conversely, an ageing population is a major drag.
A very young population i.e. an increasing percentage younger than working age is a “drag”, too. It’s the dependency ratio that’s important.
Finally, Japan is doing just fine because its per capita GDP and per capita income are both increasing and its income inequality is quite low—much lower than either ours or China’s, both of which are trending in the wrong direction.
I don’t believe demographics trends anywhere around the world except MENA/sub-Sahara Africa is good.
Birth rates in Europe, Japan, North America all collapsed on top of existing declining rates since the pandemic started. India just announced their fertility rate is now below replacement level.
Its not surprising that China situation somewhat resembles Japan of late 80’s / 90’s. China copied the post-war economic model of Japan in 1978. In Japan the model worked well for 40 years from 1950-1990. Its 40 years from 1978. Other East Asian polities (Korea/Taiwan) that copied Japan’s development model hit similar issues at roughly the same time.
There is one difference through, the CCP seems willing to take bigger risks then Japan/Korea/Taiwan to successfully move to another model, whatever that is.