China Hits Key Demographic Ceiling As Working-Age Population Now Declining

Tyler Durden's picture

The meme of the moment remains China's 'rotation' to urbanization as the new growth engine, but as SocGen's Wei Yao notes, while this shift from farmers to manufacturers has raised productivity, urban population growth is set to decelerate rapidly in the current decade. Yao comments that the impact of urbanization has been "misunderstood and overstated by the market" as it is now official that China’s working-age population has peaked and is starting to decline. China’s National Bureau Statistics announced that the share of population aged between 15 and 60 years old declined for the first time in 2012 by 0.6ppt to 69.2%. This slower labor growth brings China ever closer to the so-called "Lewis Turning Point"  at which excess labor in the agriculture sector is fully absorbed into modern sectors - leading to no or negligible productivity improvements. The bottom line is that hopes for "new urbanization" appear overdone, given the demographic (and productivity) headwinds and China's focus should shift to social safety nets and not torrid physical construction.

 

 

Via SocGen,

The new hope among policymakers and many observers is that urbanisation will be the savior, (partially) offsetting the fast deteriorating population trend. This thinking – termed by Premier-to-be Li Keqiang as “New Urbanization” – has also ignited another round of hope for China’s physical infrastructure and residential construction. However, we beg to differ.

 

First, although China’s urbanization rate still has quite some scope to increase further, the contribution to growth via labor productivity will still decline due to potentially slower urban population growth. And in terms of policy, the urgent issue, in our view, is no long to keep funding torrid physical construction, but to build a sustainable social safety net.

 

...

 

China’s National Bureau Statistics announced that the share of population aged between 15 and 60 years old declined for the first time in 2012 by 0.6ppt to 69.2%. This is a narrower gauge than the more commonly used working-age population measure of between 15 and 65 years old. Nevertheless, it highlights the pressing nature of China’s demographic challenges. Compared with the past experiences of developed economies, China reached this turning point nearly one decade earlier.

 

...

 

The impact will be more pronounced between 2015 and 2020, as the labor force is expected to see outright contraction. This wrenching demographic trend will also have a particularly negative implication for China’s capital stock growth, which accounted for 40-50% of the double-digit growth in the 1990s and 2000s.

 

...

 

This slower labor growth brings China ever closer to the 'so-called' "Lewis Turning Point"  at which excess labor in the agriculture sector is fully absorbed into modern sectors - leading to no or negligible productivity improvements.

 

...

 

To facilitate efficient urbanization, China needs a new strategy that focuses on three aspects:

  • the removal of obstacles on labor mobility,
  • a fiscally sustainable safety net,
  • and urban job creation.

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Jason T's picture

productivity is coming from them going from walking to driving cars.  hell they got high speed rails everywhere now!    

 

Bobbyrib's picture

There is no real way to tell which is the most productive country, because all of the statistics are bullshit.

Popo's picture

So China went from the world's engine of growth to peak prosperity to "Japan" in 10 years?   

Further proof that nothing about the current system is remotely sustainable.

insanelysane's picture

In a country that can force anyone to work, what exactly is workng age?  

And it is about time the Dalai Lama and his crew start working for a living, the Chinese didn't take over Tibet for nothing.

</sarc> [?]

Freddie's picture

Dalai Lama golfs like Oba-Mao. Lama is a big hitter - long.  

http://www.youtube.com/watch?v=TkLH56VlKT0

 

bugs_'s picture

sounds like China will need to do "comprehensive immigration reform" too - might need to shore up their social security ponzi - i mean - system.

johnconnor's picture

It seems the only countries with actual population growth are going to be Mexico and India

Suisse's picture

Mexico is undergoing the demographic transition, in 2011 the total fertiltiy rate dropped below the replacement rate. 

johnconnor's picture

How about the Mexicans in California? Don't tell me they are bellow the replacement rate 

DR's picture
We’re running out of farm workers. Immigration reform won’t help.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/29/the-u-s-is-ru...

Northern Lights's picture

You know, there are some cute Indian chicks.

zorba THE GREEK's picture

Time has come for 'solent green'

davidsmith's picture

Don't you mean solvent green?  Au, n'est-ce pas?

zorba THE GREEK's picture

Actually I meant Soylent Green. Chinese anyone?

GetZeeGold's picture

 

 

The problem with that stuff is that you're still hungry an hour later.

pashley1411's picture

So, we should go "long" Chinese human-traffic brides?   will do.

http://allchinesewomen.com/china_brides.htm

my beer-can collection was getting a bit tired anyway.

meizu's picture

The photos are most likely fake.

Bobbyrib's picture

Why not just stop exporting your working age citizens to other countries? I know it would affect the country's wealth, but then again so does not making sure you have enough citizens to run your sweatshops.

bank guy in Brussels's picture

Re: « China needs a new strategy that focuses on three aspects:

the removal of obstacles on labor mobility,
a fiscally sustainable safety net,
and urban job creation »

Funny that's exactly what the EU is working on, too

We will send over to China our Comrade José Barroso, Maoist Communist student in Portugal in the 1970s, and now President of the European Commission

Maybe they can figure it out, Maoist to Maoist  ... 'Sustainable' or Bust ... tho more likely 'Bust'

 

MillionDollarBoner_'s picture

That won't work. They are short on productive people, not unproductive, gobshite fucktards...

Freddie's picture

Still it might be nice if that shitbag Baroso took his evil dwarf sidekick Van Rompouy.  Maybe the Chinese will beat the crap out of him and steal his organs.   Send Oba-Mao over there too to play some golf. 

IamtheREALmario's picture

So, like with a decline in working population what are they going to do with all of the vacant apartments that those with money have been investing in? Theiir 401ks will become 201ks unless they increase the buying power of their cheap laborers.

... what a bummer.

Bobbyrib's picture

After Ben is done destroying the US we could lend him to our Chinese allies. All fixed.

rsnoble's picture

The China demographic problem has already been solved with robots.  At current pace China is on track to have a large labor surplus.

Stuck on Zero's picture

They won't need more workers.  Robots will handle those tasks.

 

tango's picture

Not sure if you are kidding or not but you are exactly right.   More and more, technology will radically change our society in ways we cannot imagine.  Old traditions like full-time work or large private cars will vanish.   In a world of cheap 3-D printers perhaps the notion of having junk for the sake of having it (50 shirts, 10 pair of shoes, etc) will change.  Despite paring down to around 1,500 books in my library I have not bought a physical book in over a year (and yes, I do miss them a little).  

RagnarDanneskjold's picture

The peak was hit in 2010 as far as it matters. That's when the population of age 18-20 workers started to decline. That's when you saw factories moving to Vietnam, Bangladesh, or using illegal labor from Vietnam in Guangdong. The wage pressures have been ongoing for 2 years now, and now it's starting to work its way into the college age population.

tango's picture

Which is why almost every economic forecast has India surpassing China in about 25 years.  The Chinese are poised to experience a huge drop in population - the European situation of fewer and fewer workers supporting more and more retirees.   China manages to finesse that by 1) keeping social spending low and 2) encourage the habit of savings. India is messier, more complicated and less efficient but the relentless wave of demographics carries it over the top. 

Northern Lights's picture

With all that pollution, the population is gonna decline that much faster.

meizu's picture

what does this mean?  nothing.  If there is need for more labor, china will just encourage more farmers to move into the city.

laomei's picture

Nah, it means they move the industrial base further from the cities while boosting infrastructure inbetween.  People are starting to figure out that the cities are expensive and their regular shit jobs back home result in better savings and living than moving to a city, working for what they consider to be a lot, and then pissing it all away on rentals in a city they will never be able to buy in.  Incentive is needed to move the industrial base closer to home.