In 7 years, the China story’s over

[Rafi]

In seven years, the PRC will be even more powerful and wealthy - God willing.

 

[qwerrty]

i haven't read the article. is it written by gordon chang?

 

[Karasonmuno]

In seven years, the PRC will be even more powerful and wealthy - God willing.

Well, maybe, but the PRC does not believe in any "God".

 

[JohnSeb]

Maybe it will slow down, but "over" is too much

 

[帅的一匹]

Chinese is the best business man in the worlds, we will be world number 1 economy in 7 years.

 

[BeyondHeretic]

imo , china was one big investment for america , the sooner china looses the sooner america is gone

 

[cirr]

in 7 years China's will be the biggest economy in the world while at the same time the Japanese economy will shrink to 1/5 China's。

 

[Fsjal]

in 7 years China's will be the biggest economy in the world while at the same time the Japanese economy will shrink to 1/5 China's。

More like 10 or 20 years time, sorry but anyway congrats to China

 

[Raphael]

The most important detail the OP left out was about the author, Ambrose Evans-Pritchard, a notorious hack of a journalist who has a very poor understanding of economics. He's also a conspiracy theorist and was kicked out of the White House after working there as an aide because he would constantly spread libel about President Clinton.

Someone asked if the author was Gordon Chang. No he's not, but he's pretty close.

 

[Anony]

Oil in the South China Sea can sustain us for many decades.

No luck for India

http://www.defence.pk/forums/centra...13-economic-slowdown-worse-than-expected.html

I have not heard about oil reserve in SCS. But yes there is a huge reserve of oil near your sea border in Vietnamese water.

 

[Anony]

In 7 years, the China's story is over

Fears in China rise as country hits "Lewis Point"

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

Another seven years or so - enough to buoy global coal, crude, and copper prices for a while - but then it will all be over – the 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?” - 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 140 million 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.

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 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.

You could argue that such a process already well under way, and is why Chinese equities are trading at a third of their 2007 peak in real terms. Manufacturing pay has risen 16% a year over the last decade in the East Coast hubs of Shenzhen, Beijing, Shanghai and Tianjin, though this slowed sharply in 2012.

Boston Consulting Group says that “productivity-adjusted wages” were just 22% of US levels as recently as 2005. They will reach 43% by 2015, or 61% for the American South.

It is a key reason why General Electric, Ford, Caterpillar and others are “re-shoring” from China back to the US, though cheap shale gas, a weaker dollar, and shipping costs all play their part.

This is no bad thing. The world economy is rebalancing. China’s current account surplus has fallen from 10% of GDP to just 2.5%.

The Lewis Point is the great test for catch-up economies, when they can no longer rely on cheap labour, copied technology, and export-led growth to keep the game going.

George Magnus from UBS said investment made up 55% of all growth in 2012, and will soon have to reach 60% to keep up the pace. It is becoming unhinged, a sort of Ponzi scheme.
The boom is rotating, of course, which makes it harder to read. The epicentre is moving west, deep into the Upper Yangtze and heartland regions holding 700 million people.
The Sichuan capital of Chengdu is completing the world’s biggest building, a glass and steel pagoda. This will soon be eclipsed for sheer chutzpah by the world’s tallest tower in Changsha, to be erected in three months flat.

The balance sheets of China’s banks have been growing by over 30% of GDP a year since the Lehman crisis and are still growing at a 20%, wildly exceeding the safe speed limit.

Fitch Ratings said fresh credit added to the Chinese economy over the last four years has reached $14 trillion, if you include shadow banking, trusts, letters of credit and offshore vehicles. This extra blast of loan stimulus is roughly equal to the entire US commercial banking system.

The law of diminishing returns is setting in. The output generated by each extra yuan of lending has fallen from 0.8 to 0.35, according to Fitch.

Magnus said credit has reached 210% of GDP - far higher than other developing countries - and only half of new loans are “plain vanilla” under the full control of regulators.

How and when this will end is anybody’s guess. He fears a “Minsky Moment” when the investment bubble pops, as such bubbles always do.

My guess is that there is one last cycle of Chinese fever to enjoy -- if that is right word -- before the ageing crunch and the credit hangover combine with toxic effect.

One thing is for sure: a middle-income country with a shrinking work force is not about to displace the United States as global hegemon.

Daily Telegraph

Though the article is pointing in the right direction but my thoughts are not totally aligned with it. It could be that Chinese growth rate will slow down and for that you don't need any big analysis. It's a cyclic process. Now China is not facing any severe competition but in days to come the competition will increase and there are many developing economy which will give severe competition to Chinese made products.

But to think Chinese story getting over is too much optimistic from competitors side and pessimistic to China's side. The author has not considered the advancement of technology in China. It is true that cheap labor may decrease significantly but it may so happen that half of the work done by labors will be done using machinery. And atleast China current account balance is positive compared to negative or deficit in current account balance of the other developing nations.Thus I find no reason for Chinese economy to fail for the reason stated by the author of the article.

 

[Guynextdoor2]

Playing artifically with demographics can cause really violent swings. I think the Chinese govt really overdid the one child policy. That should have been scrapped probably 7 or 8 years ago itself.

 

[ephone]

Again? 10 years passed. China did much better.

Again?? Another 10 years passed. China did much better still.

Again??? Another 10 years passed. China did much better still.

So what kind of fxxk-up forecast is this????

In 7 years, the China's story is over

Fears in China rise as country hits "Lewis Point"

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

Another seven years or so - enough to buoy global coal, crude, and copper prices for a while - but then it will all be over – the 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?” - 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 140 million 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.

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 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.

You could argue that such a process already well under way, and is why Chinese equities are trading at a third of their 2007 peak in real terms. Manufacturing pay has risen 16% a year over the last decade in the East Coast hubs of Shenzhen, Beijing, Shanghai and Tianjin, though this slowed sharply in 2012.

Boston Consulting Group says that “productivity-adjusted wages” were just 22% of US levels as recently as 2005. They will reach 43% by 2015, or 61% for the American South.

It is a key reason why General Electric, Ford, Caterpillar and others are “re-shoring” from China back to the US, though cheap shale gas, a weaker dollar, and shipping costs all play their part.

This is no bad thing. The world economy is rebalancing. China’s current account surplus has fallen from 10% of GDP to just 2.5%.

The Lewis Point is the great test for catch-up economies, when they can no longer rely on cheap labour, copied technology, and export-led growth to keep the game going.

George Magnus from UBS said investment made up 55% of all growth in 2012, and will soon have to reach 60% to keep up the pace. It is becoming unhinged, a sort of Ponzi scheme.
The boom is rotating, of course, which makes it harder to read. The epicentre is moving west, deep into the Upper Yangtze and heartland regions holding 700 million people.
The Sichuan capital of Chengdu is completing the world’s biggest building, a glass and steel pagoda. This will soon be eclipsed for sheer chutzpah by the world’s tallest tower in Changsha, to be erected in three months flat.

The balance sheets of China’s banks have been growing by over 30% of GDP a year since the Lehman crisis and are still growing at a 20%, wildly exceeding the safe speed limit.

Fitch Ratings said fresh credit added to the Chinese economy over the last four years has reached $14 trillion, if you include shadow banking, trusts, letters of credit and offshore vehicles. This extra blast of loan stimulus is roughly equal to the entire US commercial banking system.

The law of diminishing returns is setting in. The output generated by each extra yuan of lending has fallen from 0.8 to 0.35, according to Fitch.

Magnus said credit has reached 210% of GDP - far higher than other developing countries - and only half of new loans are “plain vanilla” under the full control of regulators.

How and when this will end is anybody’s guess. He fears a “Minsky Moment” when the investment bubble pops, as such bubbles always do.

My guess is that there is one last cycle of Chinese fever to enjoy -- if that is right word -- before the ageing crunch and the credit hangover combine with toxic effect.

One thing is for sure: a middle-income country with a shrinking work force is not about to displace the United States as global hegemon.

Daily Telegraph

 

[Kolaps]

In 7 years, the China's story is over

Fears in China rise as country hits "Lewis Point"

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

.......................................

One thing is for sure: a middle-income country with a shrinking work force is not about to displace the United States as global hegemon.

Daily Telegraph

Journalist....

They can wrote whatever narrative they like. Like writing 7 years old girl die in accident, but wrote it with a glorious happy narrative for example.


Actually this is the good news, if you know the fact and economy.

I think this is the most importance historical turning point, from the cheap labors dependable economy into an expressway to the developed country. China standard of living will increase dramatically in the coming years after this turning point.

A bold line between poor and rich country. Between quantity of labors and quality of labors.

 

[M.harris]

May be the journalist saw a dream and then wrote this article about china.