China (i)

A few days ago, mainland China’s government announced that its overall population has begun to shrink. This is not a crucial issue for today. And the working population, which is a more direct driver of economic growth, has been declining–at a faster rate than the overall population–for some time. In addition, outside observers figure that the Chinese population has been contracting for half a decade or so. even though the official statistics don’t reflect this.

What this announcement does do, however, is to focus attention on prospects for India, which will soon have the largest population on earth, if it doesn’t already.

The demographic worry for China is clear enough. There are two aspects to this:

–in its simplest form (always a plus for me), the two big drivers of economic growth are having more workers and making workers more productive. The latter comes either from workers having better tools to use or achieving a higher level of skill (through better general education and/or industrial training). A shrinking working population takes the first out of play

–having the working population shrink faster than the non-working, suggests that supporting senior citizens and other non-workers takes an ever larger chunk of GDP

The issue of Communist Party control of the country presents a second obstacle to growth.

more tomorrow

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