The day after
With the Olympics a soon to be distant memory, all of a sudden we are seeing articles questioning China’s future. WSJ:
The precedents for China aren’t encouraging. Many developing countries in Latin America and the Middle East stagnated after periods of rapid growth. Economists sometimes call this the “middle-income trap” because so many countries have failed to achieve the consistent growth that would deliver higher prosperity.
China is at the crucial boundary, no longer poor but still far from rich. It ranks 100th in the world in terms of income per person, edging out Namibia but lagging behind Colombia. President Hu Jintao frequently calls this a “crucial period” for overhauls.
In the next few years, China will cross the threshold to a majority-urban society. Since urban workers earn more than three times as much as rural ones, the annual migration of more than 10 million farmers into cities has steadily boosted the economy. But the urban-rural balance will eventually stabilize. Then people will have to find other ways to raise their incomes, such as learning new skills.
In addition, a smaller number of workers will have to support an increasing number of elderly. The United Nations projects that China’s working-age population will account for a decreasing share of the total after 2010, and will start shrinking in absolute terms after 2015 — the long-delayed effect of the strict family-planning policies that came in the 1970s. The “demographic dividend” from a young and growing work force may have been responsible for a quarter of China’s growth to date…
Though some possess a fantasy vision of China, we think there is a significant probability over the next year that the real, but glossed over, problems of China’s economy begin to become obvious.