Chinese Demographics Benefit China but Hurts the West

It is no big news that for the majority of the 99% of regular people the last 10 years in North America has been economically tough. Our young have a difficult time finding stable employment. In fact finding stable work has been a challenge for quite a long time. Products from China undercut our domestic manufacturers who have largely gone out of business. Our kids will not have a better life than us. It is clear that larger forces than the Canadian environment are at play here.

in his SCMP article Here’s how China’s aging will narrow income gaps in West author Tom Holland poses an interesting theory about the influence of Chinese demographics on the West. Whether it is true and will come to pass is speculative. I would still like to ponder its possibilities.

Here are some of his salient points:

• China has improved their water quality. Chinese people live longer.
• More girls can get a good education and then stable employment. More girls in the workforce double the number of workers. They have less free time and want to have fewer kids.
• Families have fewer kids and therefore save more. These savings boost the investment environment within China
• The World has historically low interest rates

This doubling of China’s workforce greatly increases the economic output of China. Coupled with China’s huge largess of capital and openness to the rest of the globe, China has had a huge impact on the world. China’s workforce is so large that it easily dominates the world economy. China is 4 times the size of the US and 40 times that of Canada.

Such a big supply of cheap new labour going head to head in competition with advanced economy workers weighed heavily on wages in the developed world. At the same time, China’s excess savings – China’s workers and companies saved even more capital than China needed to fund its massive investment requirements – pushed down real interest rates around the world. And low real interest rates pushed up asset prices in the developed markets.

The result has been stagnant or decreasing wages in the Western world, the likes of which we see today. Western manufacturing has been gutted.

However as China ages and its elderly balloon this trend will reverse. China’s implementation of its One Child policy has created 2 parents for each child to support. Not only it’s once plentiful supply of young workers will diminish, but its demand and expense for elder care will greatly balloon. Wages will increase, available capital and savings will diminish. The wave that allowed China to become the economic force it is today will reverse itself. Wages in Western countries will revert back to its former behaviour.

The other influence on China is its lack of regard for their environment. This environmental degradation will take generations to reverse, if it can at all.

Who knows if this theory will come to pass. I sit and wait for a change.

Addendum 2017 Sept 21 This coming global shift should finally raise wages and reduce inequality writer William Watson cites work by Charles Goodhart, professor emeritus at the London School of Economics, and Manoj Pradhan, on China’s role. Demographics will reverse three multi-decade global trends:

it argues that three big trends of the last three decades — declining real interest rates, stagnant real wages in rich countries, and both rising inequality within countries and falling inequality between them (OK, that’s four trends) — are all mainly due to a [China’s] demographic change…

“Everything about China is enormous,” Goodhart and Pradhan write. In 1990, the working-age population of China and Eastern Europe together was 820 million. In the industrialized countries it was just 685 million. The effect of integrating historically communist countries into the western world was therefore “a one-time increase of 120 per cent in the workforce available for global production.”

They do not predict the outcome of China’s aging population.

2019 Jan 04 Worse than Japan: how China’s looming demographic crisis will doom its economic dream: Author Yi Fuxian is a leading writer of Chinese demographics. His book Big Country With an Empty Nest has been both initially banned and then celebrated in China.

2019 May 07 Beijing’s one-child policy is gone. But many Chinese are still

reluctant to have more
“A great nation with thousands of years of history and a brilliant civilization is rapidly degenerating into a small group of the old and the weak thanks to these wrongheaded population-control policies.”

Addendum 2019 Jul 20 China’s population numbers are almost certainly inflated to hide the harmful legacy of its family planning policy Professor Yi Fuxian doubts China’s population is 1.4B people, claiming contradictions in China’s population numbers