Saturday 26 June 2021

Will China Grow Rich before it Grows Old?

 Short answer: China is growing old. This is inevitable. In 1980, there were 3 times more people in their twenties than there were people in their sixties. 

Now, the number of people in their sixties is almost as many as the number of people in their twenties. And there are fewer younger people (below 20) and more people in their fifties that will soon be in their sixties.

This is inevitable.

But, China could get rich, right?

They have had tremendous growth over the last few decades. If they simply continue on this trajectory, they would grow rich, even as they grow old.

Except... China's growth has slowed over the last decade.

It is still on track to overtake the US as the country with the biggest economy based on GDP by the end of this decade (2029, likely 2027).

BUT... the US population is about a quarter of China. Based on per capita GDP, the average Chinese would only be a quarter as rich as a US citizen.

According to world ranking, the US is 15th in per capita GDP. China is ranked lower than 100th. So China is not rich. 

And it will be some time before it is considered "rich".

And the problem is, it may not have the time.

The last 40 years of growth was on the backs of a "demographic dividend", when a huge labour force could be impressed into low-skill manufacturing that was greatly more valuable than traditional subsistence farming.

However, China has reach the Lewis Turning Point - there are no more surplus labour from farms, and wages in the manufacturing sector is rising. China can no longer leverage on being the factory of the world. 

The video suggests that China is not at a loss. They have some options.

Automation

One strategy is to turn to automation. Which China already does. Intensively. This will increase the productivity of factories without needing vast armies of workers. But they need to be educated. Which is another strategy.

Education

From 2010 to 2020, the number of graduates have doubled. Which is good? Unemployment rate for graduates two months after graduation were as high as 30% "in some areas". And this was the official statement. And I suspect that the figures have been "massaged" to fit some official narrative. So it might well be worse. In other words, Education in and of itself is not the panacea. The people have to be educated in the right field of specialisation, acquire the right technical skills. Otherwise, there would be a mismatch of skills and job vacancies. 

Like most countries, most Chinese graduates have only a general academic degree, not a specialised, technically-oriented qualification.

Upskilling

So China has succeeded in a few industries. In telecommunications/electronics, solar panels, High-speed rail, and maglev trains, China has made stunning progress. In the video, China is leading the world in mobile payments and e-commerce. This is very promising. Then the CCP brought Jack Ma down a peg or two. And in telecommunications, the US has blacklisted Huawei, and other telecom-related companies for their links to the CCP.



Urbanisation

The video makes this statement: People living in cities are generally more productive than rural labourers. That is generally true, because a farmer can't farm (sustainably or commercially) in a city, so if you live in the city, you are probably going to work as anything  BUT a farmer. It is the nature of the job. You won't go to the city to farm.

BUT... if you have good telecoms and IT/internet connectivity, you could possibly Work From Home in a rural area. This "urbanisation" factor is a correlation factor, and does not mean anything. Except as a possible proxy measure of something else.

Happy... and innovative

Towards the last 3 minutes of the video, the comment was that China needed to move away from the "996" mode of working - working "9 am to 9 pm, 6 days a week". The editor, also suggested that China needed to shift its focus on making the people "happy" and that a happy people are more likely to be innovative and productive. 

He ends on an optimistic note, proposing that China will get old, but it can also get rich. I think it's because they don't want to be criticised by the CCP.

The commentary suggests that in the future, China will need to invest in social care for the young and the old. BUT notes that the CCP has NEVER done this before.

Caring for the elderly will be a necessity. The old are there, and will need care. 

Providing care facilities for the young will be the way to support couples to have families. But that is simplistic. There are many considerations - working hours, wages, home prices, family time, school and childcare. That is A LOT of things that need to work together to coax the young to have children.

THAT would be a rich society.

The video ends on an optimistic note. 

But that is more hope than objective assessment. China does not have a good track record of doing the right things or doing things right. 

The inexorable march of their population into agedness is a given. 

Their creation of a rich society depends on them doing all the right things and doing things right,

God help them, but they don't believe in God.



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