Demographics are often econonomic destiny. China’s demographics are ugly. From Chris Hamilton at wolfstreet.com:
And yet, China’s total debt goes parabolic.
If a business could foresee that it would have a declining consumer base (declining number of total potential customers), that would likely be a pretty good reason for serious concern and significantly lower growth expectations. However, when it comes to China, the shrinkage of its under 65yr/old population and particularly of the 20-59yr/old population is somehow coinciding with the story of China transitioning from an export-based to a domestic consumption-based economy?
To wit, with a declining population, China will transition from exporter to consumer, while all those grown one-child-policy adults support their 65+ year-old parents, and still grow 6%-7% annually? Inquiring minds wonder how it’s possible a declining base of consumers would consume more.
In a word…CREDIT! And, the growth of credit in China has gone parabolic. It’s highly unsustainable and likely ruinous.
The Details:
Each bar in the chart below represents annual growth or decline of the Chinese adult population. The blue line is a 4 period moving average of the population change. From 1973 through 2008, an additional 12.5 million Chinese adults entered the Chinese economy every year. That meant 12.5 million more consumers, home buyers, car buyers, potential job seekers, etc.
But since 2008, annual population growth has decelerated by 95%. By 2017 or 2018, it will begin a long decline. Every year from 2018, the adult 20-59 year-old population of China will decline by millions for at least two decades and likely far longer. This is no forecast or “gloom-n-doom” fantasy, but simply counting the number of people born and tracking them through the population (plus, China has net emigration).
All this means the charts below likely show a best case scenario although the population data could be lower if greater emigration occurs or a higher mortality rate ensues due to illness, environmental, or global disturbances (aka, war).
To continue reading: China’s Population Decline Dooms the Transition to Consumer Economy
