Chinese Economics Thread

[FairAndUnbiased]

I don't buy the demographics narrative. For decades, having a huge fast-growing population was a negative for development not a positive.

This was proven out in the 1960s and 70s when China, India, Nigeria, etc. had these immensely "favorable" demographics.

In fact, in 1970, the fertity rate in China was 5.72(!!!) which rounds out to 6 kids per woman.

But China was piss-poor. As poor as India until its fertility rate began to reach first world standards.


View attachment 135946

The story of how a large growing young population is an advantage only changed in 2010s when China combined a high growth with a large population. Now it becomes a "good" thing because China was an exception.

If this young growing demographic advantage were real then Nigeria and every sub-Saharan country with that demographic advantage in the 1960s would be wealthier than Europe and Japan today, some 60 years after. Which we all know is not true.

The fact is low birth rate is a result of high development, high income and high GDP.

The only way for India to gain demographically on China in any significant way is to stay poor. If it becomes wealthy, it's birthrate would trend to same as China, Japan, Europe and the US.

A China of even 1B (losing 400M) at the GDP per capita of Shanghai nationwide would be many times the size of the GDP today. The markets will grow by factors not by percentages from today.

And China won't age away 400M in our lifetime.

China was not as poor as India in 1960s.

China had higher literacy, life expectancy and better tech. Already could build turbojets, tanks and rockets. Even nominal GDP was higher.

India briefly overtook China once in nominal GDP per capits, in the mid 1980s, due to a 1 time devaluation of the RMB.

Never before, never after.

 

[GiantPanda]

China was not as poor as India in 1960s.

China had higher literacy, life expectancy and better tech. Already could build turbojets, tanks and rockets. Even nominal GDP was higher.

India briefly overtook China once in nominal GDP per capits, in the mid 1980s, due to a 1 time devaluation of the RMB.

Never before, never after.

I agree that in the achievement of things like life expectancy, nuke dubs, literacy, etc. China was at a higher level of development.

But there wasn't much seperating China from India at the time, when we both had these massive young populations.

China trended towards East Asia in birthrate while India stayed course with much of the Global South in the years that follow -- the point is as you get richer, your birthrate falls.

If you want a bigger younger population for this "demographics advantage" then stay as poor as you can for as long as you can :

 

[FairAndUnbiased]

I agree that in the achievement of things like life expectancy, nuke dubs, literacy, etc. China was at a higher level of development.

But there wasn't much seperating China from India at the time, when we both had these massive young populations.

China trended towards East Asia in birthrate while India stayed course with much of the Global South in the years that follow -- the point is as you get richer, your birthrate falls.

If you want a bigger younger population for this "demographics advantage" then stay as poor as you can for as long as you can :

View attachment 135955
View attachment 135956

for those times with controlled currencies, low trade and low GDP per capita, nominal is basically meaningless. You have to look at physical production and social indicators. GDP is the metric, not the reality.

That is why you can't compare North Korea and India. North Korea has comparable GDP per capita but better social indicators.

China actually had an enduring 30+ year lead on India in social, infrastructure and strategic tech parameters that still exist today.

The only things they even got close to catching up on are things western capitalists can sell to their Brahmin caste. They have little domestic production.



That is because the Indian elites chased GDP numbers on a computer screen and western validation and had the incredible idea of putting services first since "advanced western economies do it and they're rich so if we do it we'll be rich too".

Chinese went for full industrial upgrading.

 

[jli88]

Look at the two industries that the West is attacking in China:

1) EVs, China has the largest EV and the largest car market by a factor of two over the next challenger,

2) Chips, China is basically 50% of the global market

The chips part is old news. In the last few years, US has again become the largest semiconductor market in the world. A big reason being the insane demand for AI accelerators, along with reshuffling of supply chains.

I don't buy the demographics narrative. For decades, having a huge fast-growing population was a negative for development not a positive.

It was considered negative for development, and that consideration has changed because of reality kicking in.

Also, through out entire history of humanity, big population was considered a good thing as they provided more people to farm, or fight. This only changed in the middle 19th century, when Europeans, supercharged with the Industrial Revolution, Enlightenment, and age of exploration, just took a very sizable early lead in Science, Technology, and Industry.

This made much larger countries like India, China being humiliated by much smaller countries like Britain. This coupled with the malthusian considerations and philosophy, made for an era where indeed huge population was considered a burden universally in the developing world including in India, China, Korea etc.

But this narrative was wrong, and 3 things happened that changed people's perspective:

1. The horrors predicted by Malthusians never came to fruition. In fact, humanity is living a life of extreme indulgence. Agricultural output increased by 10x in some cases from 1900s. Malthusian considerations hence are no longer relevant.
2. Economic, Scientific, and Industrial power became the main battlefields, and everyone realized that a domestic market, domestic GDP, etc. are the biggest resources a country can possess.
3. The fertility and population growth declined by a lot, from a time of >5 to now below 1. This started hurting economic growth.

This was proven out in the 1960s and 70s when China, India, Nigeria, etc. had these immensely "favorable" demographics.

All of these 3 are totally different countries, with totally different cultures, histories etc. China in the 1950s was emerging from a brutal 100 years of constant war, struggle, and fighting. Obviously

In fact, in 1970, the fertity rate in China was 5.72(!!!) which rounds out to 6 kids per woman.

But China was piss-poor. As poor as India until its fertility rate began to reach first world standards.

Correlation is not equal to causation. So a high fertility rate is not equal to low development. And the fertility rate of today is not enough to even sustain the country for the long term, it's simply not enough.

The story of how a large growing young population is an advantage only changed in 2010s when China combined a high growth with a large population. Now it becomes a "good" thing because China was an exception.

Depends on what "advantage" means. Large population matters (and has always mattered) for aggregate heft, not per capita standards. Here we are discussing about total heft, not per capita.

If this young growing demographic advantage were real then Nigeria and every sub-Saharan country with that demographic advantage in the 1960s would be wealthier than Europe and Japan today, some 60 years after. Which we all know is not true.

You are confusing the demographic advantage people are talking about.

1. Total size of the population is directly relevant for overall heft, not necessarily for per capita wealth.
2. People are not talking about per capita GDP. If that was the case, maybe Luxembourg, or Norway would be the greatest power in the world.
3. Culture, Institutions etc. still matter so don't just compare sub-Saharan Africa.
4. Economic conditions also change, some countries take longer, some shorter. Sometimes it is because the policies are not okay.

The fact is low birth rate is a result of high development, high income and high GDP.

Not only. Modern culture, anti-natalism of the past half century, screwed up incentives, and in China's case, strict government regulations also play a part.

The only way for India to gain demographically on China in any significant way is to stay poor. If it becomes wealthy, it's birthrate would trend to same as China, Japan, Europe and the US.

Nope, India is already at a TFR of around 2, so yes it's trending that way. However, there's a huge difference in scale and timing. India's TFR is still twice that of China (which is a huge difference). And China's TFR has been low for over 2 decades now.

So, despite them following the same lower TFR path, it happens much later. Indian annual births today are already 2.5x that of China's.

This population despite having a lower TFR in the future, can still grow rich, even if they were to follow the same low TFR trajectory of others.

A China of even 1B (losing 400M) at the GDP per capita of Shanghai nationwide would be many times the size of the GDP today. The markets will grow by factors not by percentages from today.

And China won't age away 400M in our lifetime.

Except with current TFR trends it will. (at least I wish a long life for me).

China's annual births today are less than half of it's peak. The annual births today (if they were maintained with a TFR of 2.1 in the future), will give a long term population of only 700-800 million people.

And the TFR right now still continues to go down. By the end of the century, even if China maintains today's TFR, it will still have less than 800 million people. Read this paper:

Please, Log in or Register to view URLs content!

The fertility trends and population trends in the paper that were followed in reality, are actually lower than the even the most pessimistic TFR projection. And the most pessimistic prediction is of 800M.

Also, these 800M people, probably >50% of them will be elderly. So they won't be the same 800M.

Today itself, >30% of Japan's population is over 65 years.

Are you okay with 700-800 M people (with current TFR, if it goes lower, than even worse), of which >50% are over retirement age?

 

[Eventine]

I don't buy the demographics narrative. For decades, having a huge fast-growing population was a negative for development not a positive.

This was proven out in the 1960s and 70s when China, India, Nigeria, etc. had these immensely "favorable" demographics.

In fact, in 1970, the fertity rate in China was 5.72(!!!) which rounds out to 6 kids per woman.

But China was piss-poor. As poor as India until its fertility rate began to reach first world standards.

I think this is a rather short-sighted view of history and fertility. Yes, high fertility is often associated with poverty today, but that's because poor, uneducated people tend to have more children, not because fertility causes people to become poor and uneducated. In fact, in medieval agricultural societies, high fertility was often a sign of wealth, as rich families had more children. It's only the particular culture and economic organization of modern society that causes fertility to be negatively associated with wealth.

The story of how a large growing young population is an advantage only changed in 2010s when China combined a high growth with a large population. Now it becomes a "good" thing because China was an exception.

If this young growing demographic advantage were real then Nigeria and every sub-Saharan country with that demographic advantage in the 1960s would be wealthier than Europe and Japan today, some 60 years after. Which we all know is not true.

The fact is low birth rate is a result of high development, high income and high GDP.

The only way for India to gain demographically on China in any significant way is to stay poor. If it becomes wealthy, it's birthrate would trend to same as China, Japan, Europe and the US.

A China of even 1B (losing 400M) at the GDP per capita of Shanghai nationwide would be many times the size of the GDP today. The markets will grow by factors not by percentages from today.

And China won't age away 400M in our lifetime.

Sure, if India becomes rich, its fertility will also drop. But it's all about timing - the effects of fertility collapse are delayed by 20-30 years. This creates a window of time - a moment of opportunity, so to speak - in which a country can have both wealth and population. China's moment of opportunity is right now; but India's - if it ever happens - will be set in the future, during a time when China will be suffering from the delayed effects of low TFR. Not only that, but India will reach a much higher peak population than China has today, estimated around ~1.8 billion in 2060.

That's not a long ways off - that's 30 years from now. If India does manage to also increase its GDP per capita - as indeed it currently is doing - the situation can become very dangerous as ~900 million aging Chinese will face off against ~1.8 billion Indians at the prime of their lives. This is not a sub-Saharan Africa situation - India's population and GDP per capita are both increasing, and they are getting better educated. In a generation, they could become a huge threat to China.

This is one reason, among many, that I and others have identified demographics as the single greatest existential challenge facing the Chinese state. It is pretty much the only factor that could short circuit China's super power status.

If China can return to >2.0 TFR in the next five years, then the Chinese century will be secure, as there will be enough young Chinese to deal with "peak India" + the West. If not, then there will be tough years ahead and I would encourage the Chinese government to prepare for asymmetric competition vs. larger countries.

 

[FairAndUnbiased]

The chips part is old news. In the last few years, US has again become the largest semiconductor market in the world. A big reason being the insane demand for AI accelerators, along with reshuffling of supply chains.

?????????????

Please, Log in or Register to view URLs content!

China is currently the world's top semiconductor consumer, accounting for more than 50% of global consumption, according to the Centre for International Governance Innovation. Along with this, it is also the world's fifth largest semiconductor manufacturer, following Taiwan, South Korea, Japan and the US.

Actually the 2nd sentence is inaccurate. China's the 3rd by wafer capacity and has been for years.

Please, Log in or Register to view URLs content!

 

[GiantPanda]

Sure, if India becomes rich, its fertility will also drop. But it's all about timing - the effects of fertility collapse are delayed by 20-30 years. This creates a window of time - a moment of opportunity, so to speak - in which a country can have both wealth and population. China's moment of opportunity is right now; but India's - if it ever happens - will be set in the future, during a time when China will be suffering from the delayed effects of low TFR. Not only that, but India will reach a much higher peak population than China has today, estimated around ~1.8 billion in 2060.

That's not a long ways off - that's 30 years from now. If India does manage to also increase its GDP per capita - as indeed it currently is doing - the situation can become very dangerous as ~900 million aging Chinese will face off against ~1.8 billion Indians at the prime of their lives. This is not a sub-Saharan Africa situation - India's population and GDP per capita are both increasing, and they are getting better educated. In a generation, they could become a huge threat to China.

Those stats of yours alone describe an entirely illogical understanding of demographics.

In 30 years, China's population would reduce from 1.4B to 1.3B going by current trends. India would grow to 1.6B.

If India grows to 1.6B then it has to remain relative poor. If it hits a trajectory of wealth production like China it will have far fewer children.

At current rates, China's nominal GDP by 2050 would be around $60T. India's by current trend would be around $25 - $30T.

Again, if these demographics were an advantage then why aren't the countries with massive young people demographics in the 1960s wealthier than the West today? It is not an advantage. Demographics is a result of economics not a cause.

When nations are poor they have high birthrates. When they are wealthy they have low ones. Countries do not choose this. It is the results of development we see in every country that developed.

When India hits $17T, its birthrate would be as low as China's now. By the time it hits $30T it would start seeing population declines. If its population continues to 1.8B like you were saying, it would have to increase its fertility rate as it grows economically which is against every model we see today.

You are really peddling a demographics fairy tale with your numbers that is unsupported by any real world data.

On timing, China's tremendous growth spurt came during a short 3-decade golden period when the world was globalizing. India's demographic dividends is happening with the world de-globalizing and a billion plus population country already established and competing for any new jobs in a more diminished global trade pool.

 

[FairAndUnbiased]

I think this is a rather short-sighted view of history and fertility. Yes, high fertility is often associated with poverty today, but that's because poor, uneducated people tend to have more children, not because fertility causes people to become poor and uneducated. In fact, in medieval agricultural societies, high fertility was often a sign of wealth, as rich families had more children. It's only the particular culture and economic organization of modern society that causes fertility to be negatively associated with wealth.


Sure, if India becomes rich, its fertility will also drop. But it's all about timing - the effects of fertility collapse are delayed by 20-30 years. This creates a window of time - a moment of opportunity, so to speak - in which a country can have both wealth and population. China's moment of opportunity is right now; but India's - if it ever happens - will be set in the future, during a time when China will be suffering from the delayed effects of low TFR. Not only that, but India will reach a much higher peak population than China has today, estimated around ~1.8 billion in 2060.

That's not a long ways off - that's 30 years from now. If India does manage to also increase its GDP per capita - as indeed it currently is doing - the situation can become very dangerous as ~900 million aging Chinese will face off against ~1.8 billion Indians at the prime of their lives. This is not a sub-Saharan Africa situation - India's population and GDP per capita are both increasing, and they are getting better educated. In a generation, they could become a huge threat to China.

This is one reason, among many, that I and others have identified demographics as the single greatest existential challenge facing the Chinese state. It is pretty much the only factor that could short circuit China's super power status.

If China can return to >2.0 TFR in the next five years, then the Chinese century will be secure, as there will be enough young Chinese to deal with "peak India" + the West. If not, then there will be tough years ahead and I would encourage the Chinese government to prepare for asymmetric competition vs. larger countries.

GDP per capita is a metric, not a goal. It is usually correlated with physical production but recently we've seen a decoupling of GDP from physical metrics of the economy.

So let's see where India's physical economy is.

Science:

In 2016, India had 1/8 China's score.

Please, Log in or Register to view URLs content!

In 2024, India had 1/15 China's score.

Please, Log in or Register to view URLs content!

Life expectancy:

Gap increased from a consistent ~9 years since the 1960's to 11 years in 2022.

Please, Log in or Register to view URLs content!

Food security:

India is one of the world's largest food exporters even as 190 million Indians starve.

Please, Log in or Register to view URLs content!

Average Indian eats less calories than Nigerians.

Please, Log in or Register to view URLs content!

Meanwhile average Chinese eats more protein than even Americans despite eating only half the meat. Both nutrition and health are taken care of.

Please, Log in or Register to view URLs content!

Education:

Only 1/2 of all Indian students can read at grade 2 level - in grade 5.

Please, Log in or Register to view URLs content!

India PISA rank was rock bottom.

Please, Log in or Register to view URLs content!

Is India really catching up?

 

[Wrought]

An interesting piece on economic models, bugs as features, and theoretical vs practical tradeoffs. Particularly the section on alleged overcapacity.

Western economists applaud Andreeson's economy, but disparage Xi's. I think that is madness.

Perhaps China devotes too much of its resources to strategic investment and should leave more in the hands of consumers to enjoy. But the quality of strategic investment in China is much higher than in Western economies, in large part because China structures its investments so that they finance bitterly competitive industries, while profit-motivated Western investors quite openly seek "moats" to support margins that should not even exist under the hypothetical optimality that economists must presume guides production, if they are going to make claims about "overcapacity" driven by state subsidy.

Please, Log in or Register to view URLs content!

Of course, I don't expect the verboten idea that China is doing something right which should be emulated as opposed to something wrong which must be punished to gain much traction in mainstream Western circles. Though it was

Please, Log in or Register to view URLs content!

, of all people.

 

[GiantPanda]

Is India really catching up?

Obviously, they are not and they can't. In order for India to keep pace with China this year, they need to grow 19% to China growing at 4%.

$18.53T x 4% = $741B
$3.93T x 18.8% = $741B

Any more growth from China or any less from India, they fall further behind more. Every year.

India is not growing 18.8% this year or any other year. They've hit 8% as a high but 6 or 7% are the usual good years for them.

And I am low balling China's growth. It is far more likely to grow at 5% than 4. And this while under the unwinding of a massive property bubble which in other countries like the US in 2008 has caused outright recessions.

When the RE sector is fully deleveraged who knows how high growth could go again? The re-structuring to high value industries is every bit as impactful as the entry into WTO in 2001 had kicked off years of 10% plus growth. China could experience rapid growth when the dividends from these new industries EVs, ESS, civil aircraft, nuclear power generation, chips, etc. come in. It might not be 10% again because the base is much bigger now but it could be 6 or 7%.

The only card detractors have to play is the bullshit demographics one. You look at the prediction dates they are putting up in the posts above. End of the century. Post 2100. Who the fuck knows what would happen that far out?

In our lifetime say 30 years (2054) going with current trends, it would be this:

China: $60T nom GDP; pop. 1.3B
India: $25T nom GDP; pop. 1.6B

And I think that is very optimistic for India. They are competing not just with an established supply chain in China for jobs in the global pool but also AI and automation.

Unlike China where demographics dividends of working age people come exactly at the right time when the world was globalizing and can be absorbed into a globalized supply chain, the demographics dividends generation of Indians are coming into a de-globalizing world.

Good luck trying find jobs for all those young Indians with AI devastating back offices and help centers. While China, East Asia, Europe and America will hold on to the advantages they have in their respective industries through automation.