Before reading this article note that China will, by 2060, have such a deep demographic shift that there will be over 500 million citizens between the ages of 55 and 90. Imagine the resources necessary to support this aging population. A comment from a Classiarius partner. Please read on.
China has a list of economic problems that will not go away anytime soon. The corporate debt problem, state firms (shifting to private firms), servicing existing stock debt, a declining workforce, weak drivers of productivity and a serious demographics problem are a few of the more pressing issues. The risk lies with property developers who borrowed aggressively over the past 15 years, and the government may have fewer levers to pull to correct problems in the economy in the coming years. The tightening of shadow banking is also an factor that could initiate slower growth.
Recently, the Chinese Premier Li Keqiang said at the National People`s Congress on Thursday, that growth in the second largest economy would reach 6.0 to 6.5 percent in 2019. Despite the IMF or the International Monetary Fund calling for that same number, one economist, and others are agreeing, that the growth expectations for the next decade will see a slower growth phase of 2 percent. These reports came from Mr Julian Evans-Pritchard, of Capital Economics, the senior China economist, speaking at a recent conference. We sourced materials from CNBC news.
Shadow banking refers to the lending activities that are not in the normal daily banking world, which are naturally subject to less regulator oversight. In short, it is questionable to say the least, and this is why the government is shutting down these activities. The declining workforce driven by the One Child Policy of the 1970s, has impacted productivity.
And with 1.35 billion people there were only 15 million babies born in China in 2018, a 12 percent drop from a year before. The main drag on China is the lower productivity growth according to economists.
The Capital Economics annual conference in Singapore on Tuesday drew new ideas and views from the investment community and of course, these negative points on China caught a lot of attention.