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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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Tue, 01/29/2013 - 20:25 | 3196993 Jason T
Jason T's picture

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


Tue, 01/29/2013 - 20:25 | 3197001 Bobbyrib
Bobbyrib's picture

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

Tue, 01/29/2013 - 23:30 | 3197633 markmotive
markmotive's picture

Good. Let that country shrink because it's destroying the world.


Wed, 01/30/2013 - 08:23 | 3198161 Popo
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.

Tue, 01/29/2013 - 20:41 | 3197053 insanelysane
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> [?]

Wed, 01/30/2013 - 02:52 | 3197959 Freddie
Freddie's picture

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



Wed, 01/30/2013 - 07:57 | 3198136 GetZeeGold
GetZeeGold's picture



Gunga Galunga.

Tue, 01/29/2013 - 20:25 | 3196997 bugs_
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.

Tue, 01/29/2013 - 20:53 | 3197087 johnconnor
johnconnor's picture

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

Tue, 01/29/2013 - 21:23 | 3197213 Suisse
Suisse's picture

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

Tue, 01/29/2013 - 22:37 | 3197474 johnconnor
johnconnor's picture

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

Tue, 01/29/2013 - 23:49 | 3197684 DR
DR's picture
We’re running out of farm workers. Immigration reform won’t help.


Tue, 01/29/2013 - 22:16 | 3197400 Northern Lights
Northern Lights's picture

You know, there are some cute Indian chicks.

Tue, 01/29/2013 - 20:25 | 3196998 zorba THE GREEK
zorba THE GREEK's picture

Time has come for 'solent green'

Tue, 01/29/2013 - 21:27 | 3197229 davidsmith
davidsmith's picture

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

Tue, 01/29/2013 - 22:26 | 3197432 zorba THE GREEK
zorba THE GREEK's picture

Actually I meant Soylent Green. Chinese anyone?

Wed, 01/30/2013 - 07:56 | 3198133 GetZeeGold
GetZeeGold's picture



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

Tue, 01/29/2013 - 20:29 | 3197004 pashley1411
pashley1411's picture

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


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

Tue, 01/29/2013 - 23:49 | 3197683 meizu
meizu's picture

The photos are most likely fake.

Tue, 01/29/2013 - 20:30 | 3197012 Bobbyrib
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.

Tue, 01/29/2013 - 20:34 | 3197028 bank guy in Brussels
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'


Wed, 01/30/2013 - 01:04 | 3197833 MillionDollarBoner_
MillionDollarBoner_'s picture

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

Wed, 01/30/2013 - 02:57 | 3197972 Freddie
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. 

Tue, 01/29/2013 - 20:52 | 3197072 IamtheREALmario
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.

Tue, 01/29/2013 - 20:52 | 3197085 Bobbyrib
Bobbyrib's picture

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

Tue, 01/29/2013 - 21:06 | 3197149 rsnoble
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.

Tue, 01/29/2013 - 21:09 | 3197154 Stuck on Zero
Stuck on Zero's picture

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


Wed, 01/30/2013 - 00:29 | 3197770 tango
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).  

Tue, 01/29/2013 - 21:58 | 3197331 RagnarDanneskjold
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.

Wed, 01/30/2013 - 00:32 | 3197773 tango
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. 

Tue, 01/29/2013 - 22:15 | 3197392 Northern Lights
Northern Lights's picture

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

Tue, 01/29/2013 - 23:46 | 3197679 meizu
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.

Wed, 01/30/2013 - 02:23 | 3197940 laomei
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.

Wed, 01/30/2013 - 05:50 | 3198052 GNWT
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