View Full Version : China Economy

4th Feb 2013, 12:04
Well we have the European and US threads, might as well spread the gloom around.

IMF sees 140m jobs shortage in ageing China as 'Lewis Point' hits (http://www.telegraph.co.uk/finance/comment/9845959/IMF-sees-140m-jobs-shortage-in-ageing-China-as-Lewis-Point-hits.html)

China’s vast reserve of cheap workers in the hinterland is vanishing at a vertiginous pace.

We can now discern more or less when the catch-up growth miracle will sputter out. Another seven years or so - enough to bouy global coal, crude, and copper prices for a while - but then it will all be over. China’s demographic dividend will be exhausted.

Beijing revealed last week that the country’s working age population has already begun to shrink, sooner than expected. It will soon go into “precipitous decline”, according to the International Monetary Fund. Japan hit this inflexion point fourteen years ago, but by then it was already rich, with $3 trillion of net savings overseas. China has hit the wall a quarter century earlier in its development path.

The ageing crisis is well-known. It is already six years since a Chinese demographer shocked Davos with a warning that his country might have to resort to mass suicide in the end, shoving pensioners onto the ice. Less known is the parallel - and linked - labour drain in the countryside. A new IMF paper - “Chronicle of a Decline Foretold: Has China Reached the Lewis Turning Point? (http://www.imf.org/external/pubs/ft/wp/2013/wp1326.pdf)” - says the reserve army of peasants looking for work peaked in 2010 at around 150 million. The numbers are now collapsing. The surplus will disappear soon after 2020. A decade after that China will face a labour shortage of almost 140m workers, surely the greatest jobs crunch ever seen. “This will have far-reaching implications for both China and the rest of the world,” said the IMF.


These farm workers are the footloose migrants that pour into the cities from the interior, the raw material of China’s manufacturing workshops They are carefully regulated by the semi-feudal Hukuo system to keep their families tied to villages at home, and to keep the lid on social revolt. There is little Beijing can do to head off the shock. The effects of low fertility rates - and the one child policy - are already baked into the pie. It would take half a century to turn around the demographic supertanker.

The Lewis Point, named after St Lucia's Nobel economist Sir Arthur Lewis, is when the supply of workers dries up and city wages soar. It is when labour turns the tables on capital, and profits crash................

4th Feb 2013, 12:20
It'll crash sooner than that when the West stops buying their stuff.
Low wage jobs + large house deposits = 20-somethings living at home.
and, in simple terms, that means no one is buying any new fridges.

4th Feb 2013, 12:35
Here's another graph (source: US Energy Information Administration) that can only look good by turning it upside down. Bring on the crash.


"As the data show, China is now burning almost as much coal as the rest of the world — combined. And despite impressive support from Beijing for renewable energy and a dawning understanding about the dangers of air pollution, coal use in China is poised to continue rising, if slower than it has in recent years. That's deadly for the Chinese people — see the truly horrific air pollution in Beijing this past month — and it's dangerous for the rest of the world. Coal already accounts for 20% of global greenhouse-gas emissions, making it one of the biggest causes of man-made climate change. Combine that with the direct damage that air pollution from coal combustion does to human health, and there's a reason why some have called coal the enemy of the human race."

China Is Burning Almost as Much Coal as Rest of the World Combined | TIME.com (http://science.time.com/2013/01/29/the-scariest-environmental-fact-in-the-world/#ixzz2JmsC4eJi%22*)

4th Feb 2013, 12:45
ORAC wrote:

China’s vast reserve of cheap workers in the hinterland is vanishing at a vertiginous pace.

Vertiginous? Does that have something to do with virgins? Slasher? Help me out here buddy.

4th Feb 2013, 12:58
You think virgins suffer from vertigo? ;)

4th Feb 2013, 13:05
Well I did help a virgin retain her balance once!! If China is short of people virgins will soon be prohibited.

4th Feb 2013, 14:01
Given his location, I imagine 1DC speaks from experience. Virgins are non-existent in Norfolk (human or porcine).

4th Feb 2013, 14:55
Hinterland virgins rgb, hinterland virgins mate. ;)

Reading that first graph I believe the illustrious Commie Party's one child policy is
finally catching up with 'em. And I think me and my drunken mates had something
to do with the 2007 population spike when we visited the hinterland's vertiginous
and slutacious....

4th Feb 2013, 15:34
What concerns me is that when counties face internal collapse they often look to external aggression to pacify their population. Imagine if China decides it should own Japan.

4th Feb 2013, 15:37
The counties in China won't all collapse at once - those in the North will fall
over first I reckon, but Southern ones will kick on a few more years. Its when
the whole country collapses you should worry.

4th Feb 2013, 15:53
Low wage jobs + large house deposits = 20-somethings living at home

What makes you think that China is any different. The new middle class are up to their necks in morgages and car loans; a big recession in China would be disasterous.

4th Feb 2013, 16:29
I don't.
Indeed, playing Devil's Advocate, I thought a long time ago that a good tactic for the US to gain dominance over China would have been to let Chinese exports get to this stage, then ban imports.
However, it seems this will effectively happen anyway.
What concerns me now is that the West may collapse before, or along with China.

4th Feb 2013, 16:32
Fox 3

The problem with that is, where is the US industry going to get it's product
from to sell ?

US manufacturers closed down as everyone went to China to buy everything.

The US retail economy would grind to a halt.

4th Feb 2013, 16:43
True, but the expertise still exists, and look at the expansion of US industry in WWII.

Raw materials needs would require a certain amount of, shall we say, 'securing' of resources in Africa, but even that would be better than the conditions the Chinese are rumoured to be imposing (and no worse than the current US protection of its overseas oil supplies).

China is still considerably more feudal and corrupt than America. Thus, like the Soviet Union before it, it will collapse first in an economic war. The Chinese know this, which is why they've been playing it softly, softly until they can transform to a less feudal economy.

West Coast
4th Feb 2013, 18:55
I'm sure india and other up and comers would love that scenario. China and the US, joined at the hip but pissing in each others pot. Mutual suicide, but I don't dismiss it's possibility.

4th Feb 2013, 19:15
Indeed, Brazil too.

Milo Minderbinder
4th Feb 2013, 20:09
if the country population crashes.....who grows the food?

they're going to have to aggresively capture a population of farmers to keep the remaining chinese workers fed

West Coast
4th Feb 2013, 21:02
That's question I have been asking for a couple of decades in the US as traditional farmers are becoming a rare commodity, replaced by large commercial farming methods and advances in science. That said, the markets are as full of food as ever. I imagine the blue prints for that are as accessible as were the plans for the nuclear weapons.

4th Feb 2013, 21:06
they're going to have to aggresively capture a population of farmers to keep the remaining chinese workers fed That's actually not true.

One of the truths of improving an economy is moving people off the land and into industry where the value added increases, farming is sub-basic wage labour. Far better to grub out small fields and go to industrial scale farming. A crew of 10-20 workers can do the work of several thousand peasant farmers on 1-2 acres each.

4th Feb 2013, 21:13
...only if the diesel keeps flowing

West Coast
4th Feb 2013, 21:27
I believe their agents of influence, stuffed with cash are roaming the earth seeing to that

4th Feb 2013, 21:49
Doubtless. Their politburo isn't exactly full of idiots. Wen has a post-grad degree in geology, Hu has a degree in Hydraulic Engineering, Li has a PhD in Economics. If anyone is aware of China's power requirements and how best to acquire them, they are.

4th Feb 2013, 21:51
Isn't that why China is building Nuclear reactors and a heap of them ?

To get them off coal and diesel ?

4th Feb 2013, 21:52
I should imagine so, and to improve air quality.

Oh, and Xi has a degree in Chemical engineering and has visited Iowa to study US agriculture. He is quoted from Feb 2009 as saying "the greatest contribution towards the whole of human race, made by China, (is) to prevent its 1.3 billion people (dying) from hunger"

These dudes know exactly how to plan this sort of stuff.

4th Feb 2013, 22:42
These dudes know exactly how to plan this sort of stuff.

No doubt of that. What somewhat puzzles me is, China is sitting on a vast amount of oil and natural gas fields, many discovered by my former company, that are, as far as I know, still remain untouched. Why?

I've a good idea. but is the work of a fictional novel and could be considered a conspiracy theory.

4th Feb 2013, 22:49
As you know, it means they will still have it when the rest don't.

4th Feb 2013, 22:58
still remain untouched. Why?

Wait till you've used up everyone else's, then you can name any price you want as you're the last source.

Pretty much what fox said......

4th Feb 2013, 23:01
Nuclear is probably a better option for them as well
plus cleaner.

4th Feb 2013, 23:02
Whereas the UK is run by a bunch of knobs with degrees in PPE and Modern History from Oxford, who wouldn't recognise a power station if it jumped up and bit them on the nose.

4th Feb 2013, 23:13
Wait till you've used up everyone else's, then you can name any price you want as you're the last source.

Rats, that was my idea, was going to write a novel about it and get rich. :(

So back to depending on winning the lottery, a big lottery, to get rich. :ok:

4th Feb 2013, 23:23
If they sell at all, the price will be what empires have always demanded - land. To start with, it will be acquiescence in their stealing of others' land. Arguably this is already happening in Tibet and Africa.

Ronald Reagan
5th Feb 2013, 11:12
Most interesting Fox 3, really superb posts. I have always admired the Chinese government and the Chinese people, they are very intelligent and have this can do attitude which has taken them far. I would go as far to say that they are probably the most capable leadership in the world. Give it 10, 20, 30, 40, 50 years from now, exactly how powerful are they going to be?!
The sad irony is our leadership in western nations seem to have no real ability to do anything at all other than to ruin everything they touch and to go from one disaster to another! I think its over for us now in the west and we will continue to decline.

5th Feb 2013, 11:31
You think virgins suffer from vertigo?

Nah, heights are no problem. It's lengths and depths they worry about.

5th Feb 2013, 12:14
The problem with that is, where is the US industry going to get it's product from to sell ?

US manufacturers closed down as everyone went to China to buy everything.

The US retail economy would grind to a halt.

Thirty or fifty years from now, many manufactures will come from small but highly automated job-shops that can retool very cheaply and easily to make a wide diversity of products -- rather like a custom printing company these days.

To complement the production ventures, storefront design-automation companies (and webfront) will offer very quick inexpensive design and tool setup for things that would seem impossibly complex today - made in quantities that would not be economical today. Spare parts... who needs em? Just run off a new original at the corner automatatron&deli while having lunch.

5th Feb 2013, 12:41
It's a possibility arcniz, but the equivalent of small local workshops producing the goods of the day existed in Britain till the 50's.
Small manufacturies only exist in large numbers when large scale industries cannot compete using their economies of scale. This happens when transport costs are high, or expertise is localised, or labour cost differentials exist to benefit the smaller local 'shops. None of these are true at the moment. If the oil runs short, the first point will become relevant again. If the west gets ahead with new robotic technology/3-D printers and the like, we may regain the second point. If Chinese wages balloon as ORAC predictes, the third point becomes relevant.

There are a lot of western industries which are very inefficient. It is frankly ridiculous that I can get a custom circuit board from China faster than from down the road, never mind cheaper, with a much smaller minimum order and with better service.
In theory, one can improve the situation by removing the shackles on capitalism. In practice, it seems removing the shackles just leads to greater worker exploitation and the same crap service.

But supplies of raw materials will still be required. In simple terms, you're pretty screwed if your country has no steelworks/chemical plants etc left.

flying lid
5th Feb 2013, 16:30
Increasing lack of clean water to drink (they pollute all their rivers), food to eat (they don't grow anywhere nearly enough) and energy (oil & gas mainly- they have plenty of coal to pollute themselves with) will seriously affect China in the years ahead.

Yes, similar in the UK also, but there's only 60 million of us compared to 1.35 Billion of them.

I wish them luck, for when things start to go wrong for 1.35 Billion folks - well, I can't even begin to guess --------


5th Feb 2013, 17:12

"Thirty or fifty years from now, many manufactures will come from small but highly automated job-shops that can retool very cheaply and easily to make a wide diversity of products -- rather like a custom printing company these days. "

The US had this.

I used to deal with a company in the US that made T Shirts - white, T Shirts as sold by Wal mart and thousands of others. They also made other clothing.

if Wal mart ran out of Size XL, XXL and XXXL, they would place a small order, he'd make them, send them to their central warehouse and they had them in a week.

Driven by the $$$, they now get them made in China. 6 months lead time, have to order 100,000's each order.

So now they run out of something, it's not so easy to re stock - lost sales.

So they had this small, easily retooled shop and decided to go to the bigger version.

And like most things, just because they buy it cheaper they seem to
sell it cheaper as well so do they really make more money ?

3D printers are going to be the biggest leap in getting something made,
especially prototypes which at present are very costly.

6th Feb 2013, 01:20
BBC News - China promises rise in minimum wage to close income gap (http://www.bbc.co.uk/news/business-21347819)

ORAC, take a bow.

6th Feb 2013, 08:49
one problem that politicians, or many economical commentators seem to invoke is the factor of growth. growth spurts cannot be maintained, they never have and never will. Many fixate on growth as a byline, the important factor should always be stability.

Once there is stability, growth will occur on a smaller percentage but will be longer term. With instability, growth factors will occur in larger percentages but will not be sustained and will always be short term with a resultant crash.

6th Feb 2013, 23:46
a population of farmers to keep the remaining chinese workers fed
... they're quite keen on buying NZ farms at the moment ....

6th Feb 2013, 23:51
And Australian Farms.

Article in the newspapers the other day about China having reached "peak coal use" because the authorities are going to start cutting back its use.

7th Feb 2013, 07:13
... they're quite keen on buying NZ farms at the moment ....

they've been buying large swathes of african ag land too as well as mineral deposits...

7th Feb 2013, 07:32
- Sell your farm (http://www.ccagr.com/content/view/37/125/)

They'll buy anybody's farm.

As another well-known Communist said;

"When we hang the capitalists they will sell us the rope we use"

Ronald Reagan
11th Mar 2013, 19:59
Been following recent events in China very closely. They have done well indeed.

Some of the things that caght my eye were:-
In the past 5 years:- Economy has nearly doubled in size, from £2.83 trillion to £5.5 trillion.
China has built 31 new airports in the past five years,
18 million more subsidised houses,
more than 12,000 miles of new railway track plus
380,000 miles of new roads
This year there will be a 10.7% increase on defence spending aswell.
ä¸*å…± 国际æ*Œ Chinese Communist The Internationale [HD] - YouTube (http://youtu.be/mxRMeVvP-Ug)

Compare this to the absolute disaster that has taken place in our western nations ie Europe, UK, USA.

11th Mar 2013, 20:05
At least the Chinese officials now wear 'Western' style suits and not the Chairman Mao overalls that were worn by the Chinese Trade delegation that we entertained in England the 1970s.

12th Mar 2013, 00:48
Chinese officials now wear 'Western' style suits

"To weaken the enemy's guard you have to act in the open, hiding your hidden intentions with ordinary everyday activities."

Sun Tzu - 500BC

12th Mar 2013, 00:51
Fox3 beat me to it.

12th Mar 2013, 00:56
At least we know what the Chinese are up to Slash!

p.s. Is that 'Nam as in Chelte'Nam?:E

12th Mar 2013, 01:33
Nam as in Viet Nam - where former NVA once told me their higher-ups followed the rules of ST and not of attrition.