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
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
