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.
Nobody seems to know what's going on with the economy – CNN
(CNN)If you’re confused by the US economy, which simultaneously shows signs of strength and cause for concern, you’re not alone.
- This is a particularly unusual environment. It is making predictions really difficult for economists. The labor shortage, supply chain crisis, energy crunch, inflation and Covid-19 situations all wrapped into one make for a delicate balancing act. We should cut economists a break.
- Right in the long run. Economists actually have been proven correct over the past several months when they initially were thought to be wrong. That’s because the reports keep getting revised higher in subsequent months as Labor Department economists get more data. It’s not only hard for economists at Goldman Sachs and JPMorgan to figure out — it’s hard for the government, too.
- Don’t focus on expectations. The forecasts aren’t the important thing here — it’s the actual data. And one month doesn’t a trend make. We’ve had some shockingly good jobs data in recent months, and November wasn’t all that bad — just not quite as good as we had expected.
Omicron Variant May Be Good For Economy – Forbes
The omicron variant of Covid-19 has sparked great fear. With time, we may find the fear to have been justified, but we may find the opposite: that this is good news for the economy.
It’s still early days for our knowledge of omicron. Waiting to learn more seems to make sense, but consider this: Business decisions are being made every day. Any person who waits for perfect certainty—about the economy, technology or Covid-19—will never make a single decision. In many areas decisions have to be made this week. So it’s worthwhile to consider how omicron may be good for the economy.
Omicron seems to be displacing the delta variant in South Africa. Ted Wenseleers showed that delta’s share of total Covid-19 cases in South Africa has plummeted while omicron has surged. Because the early indications show that omicron was highly transmissible, it could well displace the delta variant around the world.
So far omicron has triggered a surge in infections in South Africa, but not a comparable increase in deaths. There’s good reason for the virus to mutate to be less dangerous. Bugs that kill their hosts don’t replicate as much as bugs that allow their hosts to remain alive. Many viruses in the past have evolved to be milder. We cannot take this idea too far, however.
The omicron virus may have mutated so that it has greater ability to infect those who already had been exposed to earlier variants. That’s no surprise to South African scientists, who have observed a very high past infection rate in their population. The virus could not get ahead by finding people never exposed to any version of Covid-19, so it found a way to infect the previously ill, this theory goes.
BioNTech CEO Ugur Sahin said recently that current vaccines probably help protect against severe illness from the omicron variant, and that new vaccines are under development that would be more targeted against omicron. Given the speed with which our vaccines were developed, we may have new versions being tested in the lab right now. The question will be how long we have to wait for regulatory approval.
From an economic forecasting viewpoint, business leaders should consider the upside potential of omicron. Although it is way too early to be sure, we may find that the disease becomes dominated by a less dangerous mutation. Illness would continue if this happens, but with fewer deaths and hospitalizations. People would come to feel more comfortable dining out, traveling and seeking routine non-Covid healthcare tests and procedures. The rosy view is far from certain, but current evidence is not more pessimistic.
Companies that that are especially sensitive to the Covid pandemic should try to delay big decisions. We’ll have better information in the coming weeks. But decisions that cannot be delayed should probably consider the possibility of a stronger economy rather than greater Covid problems.
Can the global economy battle through another COVID-19 setback? – Aljazeera.com
Video Duration 26 minutes 00 seconds
A new coronavirus variant has forced governments to impose travel bans just as economies were starting to recover.
Last week, after scientists in South Africa identified a new coronavirus variant, borders were suddenly closed off to passenger travel from Southern African countries, oil prices fell more than 10 percent, and stock markets took a hit.
Markets and economies are expected to face weeks of uncertainty as investors closely watch for updates on Omicron. What comes next largely depends on what scientists discover and how quickly they do so.
Also, green hydrogen has been hailed as the energy of the future; can it help decarbonise economies?
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