Chinese Economics Thread

[duncanidaho]

5 x 5 = 25

Now let's multiply the former by 1.5 (50% increase, +2.5) and the latter by 0.5 (50% decrease, -2.5).

5 x 1.5 x 5 x 0.5 = 18.75

Do you get it now? If your productivity increases by 50% and your population drops by 50%, that leads to a large drop in aggregate productivity. To just maintain the same aggregate productivity, you need a 200% increase in productivity to compensate for a 50% drop. To compensate for a 75% drop, you need a 400% increase in productivity. It's not enough to grow productivity at the same rate as you're losing population. If China's population is decreasing 1% each year, you need more than 1% productivity growth just to maintain GDP.

Sorry, but you have no understanding of percentage calculation!

If you have a decrease of 50% of your population, how much percentage do you need to increase now to have the same population as before? You need to increase by 100%!

You have to increase your productivity by 100% when your population decrease by 50%.

5 x 2 x 5 x 0.5 = 25 is the correct way to calculate it.

 

[xypher]

5 x 5 = 25

Now let's multiply the former by 1.5 (50% increase, +2.5) and the latter by 0.5 (50% decrease, -2.5).

5 x 1.5 x 5 x 0.5 = 18.75

Do you get it now? If your productivity increases by 50% and your population drops by 50%, that leads to a large drop in aggregate productivity. To just maintain the same aggregate productivity, you need a 200% increase in productivity to compensate for a 50% drop. To compensate for a 75% drop, you need a 400% increase in productivity. It's not enough to grow productivity at the same rate as you're losing population. If China's population is decreasing 1% each year, you need more than 1% productivity growth just to maintain GDP.

Uh, demographics aside, this is wrong - to compensate for 50% drop, you need a 100% increase, not 200%. This is just how percentages work, it does not mean that every person has to be 4x as productive to compensate for population drop - 2x drop in population and 2x increase in productivity cancel each other out in your own equation. With shrinking population, every percentage of GDP growth is a net gain in productivity, so unless you think that China will enter recession soon, productivity growth will keep outpacing population decline.

 

[ZeEa5KPul]

If China's population is decreasing 1% each year, you need more than 1% productivity growth just to maintain GDP.

How much more than 1%? What's the productivity growth needed to offset a 1% decline in population each year?

Productivity growth is fastest when a country is industrializing

China is still industrializing and will remain so for the next twenty years while the 200 million surplus rural population migrates to the cities.

Expecting the same productivity growth for the next three decades is the height of hubris.

Who told you I expected the same productivity growth for the next three decades? You have a remarkable ability to put words in people's mouths.

In fact, China's productivity growth has slowed to ~5% from ~15% two decades ago.

First, I don't accept that "in fact"; show your proof for this. Second, even if this is true, it's more than sufficient to offset China's population decline even in catastrophic scenarios.

This trend will continue because there are physical limits to productivity. No government policy, however superior, is going to change natural laws.

This is just wrong. Productivity is unique among economic quantities for having no theoretical bound. What's the productivity of a fully automated economy with zero human input? Since you like to talk about "natural laws", what "natural laws" does artificial general intelligence violate?

 

[BoraTas]

How much more than 1%? What's the productivity growth needed to offset a 1% decline in population each year?

China is still industrializing and will remain so for the next twenty years while the 200 million surplus rural population migrates to the cities.

Who told you I expected the same productivity growth for the next three decades? You have a remarkable ability to put words in people's mouths.

First, I don't accept that "in fact"; show your proof for this. Second, even if this is true, it's more than sufficient to offset China's population decline even in catastrophic scenarios.

This is just wrong. Productivity is unique among economic quantities for having no theoretical bound. What's the productivity of a fully automated economy with zero human input? Since you like to talk about "natural laws", what "natural laws" does artificial general intelligence violate?

I also find it kinda funny how people assume the US will grow at 3% annually forever. They couldn't achieve that even in the 2010s despite very high government budgets and almost 0% interest rates. The US will likely be growing below 2% by 2040 too.

 

[CMP]

I am pretty sure he is trolling. There is no way someone fails this hard at elementary school math.

 

[Eventine]

Uh, demographics aside, this is wrong - to compensate for 50% drop, you need a 100% increase, not 200%. This is just how percentages work, it does not mean that every person has to be 4x as productive to compensate for population drop - 2x drop in population and 2x increase in productivity cancel each other out in your own equation. With shrinking population, every percentage of GDP growth is a net gain in productivity, so unless you think that China will enter recession soon, productivity growth will keep outpacing population decline.

The point is that 1% growth in productivity doesn't cancel out a 1% decrease in population. If you're going to use percentages then you need to realize that a 50% decrease in population requires a 100% increase in productivity to compensate (and yes, it should've been 200% of the current, not 200% increase). So if the media reports that China's productivity per capita rose 1%, but its population dropped 1%, that's a negative GDP effect, not a break even, because 1.01 * 0.99 < 1.0. You need higher productivity growth % to compensate for working population loss %, an essentially unsustainable requirement long-term.

Yes, math wise, it's 2x to compensate for 1/2x. Seems simple, but the practical effect is the same as in stock trading - if an asset you hold drops 60%, you need its price to increase 150% to get back to break even. People don't appreciate how much harder that is, compared to the former.

 

[Eventine]

How much more than 1%? What's the productivity growth needed to offset a 1% decline in population each year?

The equation is (1/(1-x/100) - 1) * 100, where x is the percent decrease of the population.

Simplifying for TFR effect, the working age population is expected to decrease 43% every generation with a TFR of 1.2. This corresponds to a need to increase productivity by 75% to maintain the same GDP output. That was easy for China to do back when it was industrializing; it's much harder to do now.

China is still industrializing and will remain so for the next twenty years while the 200 million surplus rural population migrates to the cities.

Yes, there's still a window for growth in China due to the large rural population, but that population, make no mistake, is also aging, so there's not much time left to transform them into high productivity workers.

Who told you I expected the same productivity growth for the next three decades? You have a remarkable ability to put words in people's mouths.

First, I don't accept that "in fact"; show your proof for this. Second, even if this is true, it's more than sufficient to offset China's population decline even in catastrophic scenarios.

This is just wrong. Productivity is unique among economic quantities for having no theoretical bound. What's the productivity of a fully automated economy with zero human input? Since you like to talk about "natural laws", what "natural laws" does artificial general intelligence violate?

Again, let's compare a country like South Korea, well known for its robot density and automation. This is the productivity growth rate of South Korea, from:

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Productivity growth, which was the fastest in the OECD area between 1990 and 2010, averaging more than 5% a year, has fallen to 0.8% since 2011, close to the OECD average.

If China's productivity growth falls to 0.8% (the OECD average), it most certainly cannot make up for its impending working age population loss (which was 0.5% in 2021, but is set to accelerate due to much lower TFR in newer generations).

 

[PeoplesPoster]

Easy, open up immigration,

 

[56860]

Easy, open up immigration,

Not going to sit well with the population after you've been limiting them to 1 child for 30 years.

 

[FairAndUnbiased]

Easy, open up immigration,

From who? The people who most want to immigrate to China are Southeast Asians but entire ASEAN only is 0.5 billion.