Some would argue the super-cycle is already over and in terms of double-digit growth, it almost certainly is.
But even Chinese growth of 7% today is sucking up commodities at a faster rate than 10-12% was in 2007, simply because it is 7% of a much bigger GDP number.
Miners have taken heart from recent rises in the rate of GDP growth to sustain their belief the economy has bottomed and will continue to rise into next year. And indeed it may: as we wrote recently, the Chinese economy is benefitting from a mini-stimulus this summer that supported investment in infrastructure and seems to have boosted the fortunes of the crucial construction industry.
But – and you know there is nearly always a but with us – some are not so sanguine about China’s medium- to longer-term growth prospects.
The Chinese communist party is meeting this month for the third plenum of the party’s 18th Central Committee to announce policy initiatives aimed at steering the economy through the major challenges it will face over the next 10 years and beyond. The FT paints a picture of an economy facing serious challenges, most notably a society aging before our very eyes.
It is hard to overstate, the paper says, how fast China is aging. Life expectancy has more than doubled from 35 in 1949 to 75 today, a miraculous achievement, yet at the same time, the fertility rate has plummeted to 1.5 or lower, far below the 2.1 needed to keep a population stable.
The paper quotes Cai Fang, a demographer at the Chinese Academy of Social Sciences, who says the country will have moved from labor surplus to labor shortage at the fastest pace in history. In 2011, its workforce shrank for the first time. Timothy Beardson, in his book Stumbling Giant: The Threats to China’s Future, is quoted as observing demographics as being the single-biggest obstacle to China’s dream of becoming rich and powerful. He is quoted as listing four major challenges facing Chinese society from here onwards.
The first is growth. China is reaching the end of a 35-year period when it was able to conjure gross domestic product simply by shifting workers from low-productivity farm jobs to higher-productivity factory ones. The article notes the policy to “Just Add People” will no longer work and innovation will have to become the cornerstone of growth.
Second is aging. The number of Chinese over 65 will triple to 300 million by 2030. Today, only 1.5% of the elderly are in institutional care. But the low birth rate will make it harder for single offspring to look after parents and grandparents. China may soon need institutional care for tens of millions, eventually hundreds of millions, of people, no easy task for a country with threadbare social services.
Third is the gender imbalance. Because of the preference for male children, there are now roughly six boys born for every five girls. In the next two decades, that will mean tens of millions of men will have no chance of finding a wife. Mostly poorer and with fewer prospects, they could well become a source of social discontent and crime, the article states.