Workforce Decline Affects China’s Growth Engine

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For the second year in a row, the sheer population of working age participants in the Chinese labor force has decreased. According to Bloomberg, President Xi Jinping has ambitions which are increasingly difficult to achieve as the percentage of the population which is working age continues to decline. The retirement age is also on the rise in China however; so hope is illusive but remains.

To ease the problems of worker shortages in the future and the now, the one child policy has been eased. New ways to maximize growth will also be considered. Lombard Street economist Freya Beamish in Hong Kong notes, “The decline of the labor force just makes everything more difficult in terms of generating growth. You have less people to take part in production and that reinforces the need to be more productive. It makes more urgent the need for China to find ways to shift capital to areas of the economy that can boost productivity.”

  

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The slow of the growth engine is a huge economic event- and one that puts emerging market investors into a cold sweat; but it needs to be placed such that proper comparisons can be made. The missed expectation of growth has slowed from 7.8 percent to 7.7 percent. This is compared with Eurozone or U.S. economic growth which, if found to be at even 2 percent, would be a miracle of the highest order.

image: www.39yst.com