Forget all the other worries about China. The big problem is that the country is going to run out of its most productive workers.
Ultimately, this means that growth will start grinding to a near crawl, at best.
“Most analysts believe China will rebound,” states a recent report from Frost Investment Advisors titled Cracks in China’s Economy. “That may well be true, but we think there are some cracks in the foundation.”
Of course, many investors already know about the country’s out of control real estate debt, as evidenced by the problems at Evergrande Group. And they may be aware that the communist country is clamping down on business in a big way with increase regulatory actions. That shouldn’t surprise many people because China is a centrally planned economy.
In any event, those two issues, which the Frost report also raises, could likely be fixed in relatively short order, if the government really wanted to do so. I don’t think the Chinese leaders do want to fix the regulatory excess, but they may have to fight the debt surge like it or not.
Where are China’s Babies?
However, the Frost report highlights a more gnarly problem: the forthcoming lack of highly productive workers. Put another way, there’s been a dearth of baby making in China for decades now and that means there’s a demographic bulge.
“China’s population is aging rapidly, with the most productive members of the labor force set to retire in less than 15 years,” the Frost report states.
It gets worse.
“The country’s birth rate has declined significantly over the last 20 years and shows signs of flattening in the decades ahead,” the note continues. An accompanying chart shows that the death rate in the country already vastly exceeds the birth rate.
This matters because a country’s economy can grow only when its population grows or when its per worker productivity rises. As the population shrinks, then the whole growth of the economy will reply on worker productivity.
And there’s the rub, because how will that productivity grow when big businesses are increasingly cautious about investing in China and when the country’s own government is stymying growth will a boom in unnecessary regulations? It likely won’t, which means sooner or later the second largest economy will start to contract.
“Many Chinese may well get old before they have the opportunity to build the assets they need to retire comfortably,’ the report states.
Aerial view of the solar power plant on the top of the mountain at sunset
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
