By Gary Stringer, Kim Escue and Chad Keller, Stringer Asset Management
Imagine that state of California, a population of about 40 million people, without a single female. 40 million men is the demographic challenge that China is facing today.
Demographic trends offer some of the most accurate indications of what the future holds. With large populations, it is possible to forecast future trends because 1) the size of each age cohort is known and 2) life expectancies and the number of deaths per year can be accurately forecasted.
If the current generation of China’s child baring age population (ages 20-39) and the next generation (ages 0-19) offer any clue of what China’s future holds, we expect significant difficulties ahead for the country.
For example, a country’s long-term economic growth is largely driven by the growth rate of that country’s labor force and the productivity growth of that labor force. While a growing labor force is generally considered a tailwind to economic growth, a county whose labor force is not growing will have difficulty maintaining an economic growth rate sufficient to increase prosperity. As the following chart illustrates, China’s future generations of labor force are stagnant or shrinking in size. This alone creates a major challenge to economic growth.
Importantly, the details behind the lackluster economic trends are even more worrisome. Not only is China facing long-term stagnant economic growth due to the lack of labor force growth combined with a lack of innovation necessary to drive productivity growth, but China is facing even greater trouble due to the imbalances within their demographic trends. The entire population of California is roughly 40 million people. That number approximates China’s demographic imbalance.
China has approximately 40 million more young men than young women. Imagine the state of California without a single female. That approximates the extent of China’s long-term demographic challenge. As a result of this significant problem, we expect to see decades of civil unrest and a huge standing army to help pacify the population and give millions of young men, who won’t be busy having families and raising children, something to do.
Even under the best circumstances, this is likely a long-term challenge for China. It takes about 20 years to make child baring adults, so if China starts today, and if they are successful, the solution is decades into the future. Or, more likely in our view, China’s strength will fade while the government necessarily focuses on problems at home.
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