China’s Collasping Demographic and the End of Chimerica

…by far the most massive falloff in young manpower is set to take place in China. Over the next 20 years, by the Census Bureau‘s projections, this key working age group will be falling in China by fully 100 million persons—or over 30 percent. – AEI

We knew that China has a demographic problem, but the following chart from the American Enterprise Institute did surprise us a bit.   China’s medium age is only about one year younger than the U.S. and because their population is large relative to the rest of the world, looking at non normalized data relationships (size of population, for example)  such as in the following chart can distort reality.   But………………   The AEI writes,

Over the past 20 years, the two greatest centers of manpower growth were India and China—which of course also happened to be two of the world‘s most rapidly growing economies at the time. Over the next 20 years, by contrast, the greatest single share of the world‘s increase in working-age manpower (well over a third of total manpower growth) is set to accrue to sub-Saharan Africa—the region with the modern world‘s very worst overall record of long-term economic performance…

On the other hand, a growing number of countries and regions are set to experience shrinkage in their working-age manpower over the next two decades. These include Japan, Western Europe, Eastern Europe, the Baltic and CIS countries, and China—in other words, most of the current advanced OECD economies, and many of the contemporary world‘s seemingly most promising ―emerging markets…

The situation does not look better when we break down prospective global manpower growth into its subsidiary age-group components. In modern economies, younger workers are especially important to prospects for growth, for they typically have the highest levels of educational attainment, and bring the latest knowledge and the newest technical skills with them to the job. Over the next 20 years, however, the worldwide pool of young manpower will undergo a severe deceleration. According to Census Bureau projections, the total global increase in young manpower (ages 15-29) between now and 2030 would be just 4%, or 70 million persons—barely a fifth of the aggregate increase over the two decades just past.

Only sub-Saharan Africa stands to see an appreciable growth in youth manpower. In fact, the sub-Sahara will account for over 100% of total growth in the world‘s 15-29 population, because many regions will find their pools of young manpower shrinking over the next two decades. Japan and Europe as a whole are both on course for significant absolute declines in this key manpower pool over the next 20 years (prospective drops of almost 25%). But by far the most massive falloff in young manpower is set to take place in China. Over the next 20 years, by the Census Bureau‘s projections, this key working age group will be falling in China by fully 100 million persons—or over 30 percent.

Now you know.  The Facebook/Twitter demographic in China is about to get a lot smaller.   The shifting world demographic will have a profound impact on the global economy and geopolitics going forward.   The recent increases in Chinese wages and the MENA uprising are just a taste of what’s to come.   The Chimerica/Bretton Woods II model which drove the global economy over the past 15 years is dead,  in our opinion.

The world has entered a period of uncertainty where markets are grappling with this new reality.   We are  not sure how and what new model will develop,  but the markets definitely seem to be voting it won’t be Dollar centric.   Stay tuned.    

(click here if chart is not observable)

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4 Responses to China’s Collasping Demographic and the End of Chimerica

  1. John L says:

    Thank you for posting this. It will be the primary driver of secular trends in global productivity and potential output over the next 25 years, yet I feel its significance is unappreciated. I could add some statistics contrasting the growing vs. shrinking regions but am afraid they may be interpreted as politically incorrect.

  2. sextisfaction says:

    To continue enjoying high growth, the existing economically high growth areas will in future either have to allow migration of the labor from sub-Saharan region or they invest in these areas to ride on to their potentially high future growth momentum

  3. Secondstep says:

    Nitwits like Eberstadt relish “finding” things that can go wrong with China’s ascension out of fear, jealousy and resulting wishful thinking. Consider that the U.S. is far more productive than China with a population one third the size!!! China is rapidly moving away from its dependency on low value, high labor content goods to high value, low labor content goods.

    It’s fine that Eberstadt doesn’t agree with China’s one child policy, but it’s totally idiotic to concoct a story of economic death spiral.

  4. Pingback: Inflation Cometh: The End of Cheap Chinese Goods | elsyrowden

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