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.

China population by age group

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.

China Gender Breakout by Age Group

China More Males Than Females By Age

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.

DISCLOSURES

Any forecasts, figures, opinions or investment techniques and strategies explained are Stringer Asset Management LLC’s as of the date of publication. They are considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect to error or omission is accepted. They are subject to change without reference or notification. The views contained herein are not be taken as an advice or a recommendation to buy or sell any investment and the material should not be relied upon as containing sufficient information to support an investment decision. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Past performance and yield may not be a reliable guide to future performance. Current performance may be higher or lower than the performance quoted.

The securities and strategies identified and described may not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.

Data is provided by various sources and prepared by Stringer Asset Management LLC and has not been verified or audited by an independent accountant.

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