Chinese Economics Thread

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Interesting piece and a few good points countering the hype of the AIIB these few days.

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If it didn't matter according to the article than why did the US make such an effort to tell it's allies not to join AIIB in the first place?

 

[solarz]

Not too sure what point you are infering to - if you meant labour are disappearing as
construction/infrastructure boom is ending - I think you are under-estimating chinese appetite for property investment. It is almost ingrained in the Chinese culture to invest - and as China go from the old agarian culture where saving and putting money in the bank is the "right way of investment" to the modern property investment (and even stock market), the demand for property will continue. Not to mention China still plan to build another 8000 km of HSR and linking up those HSR with the surrounding countries which are under the AIIB/Silk Road plan. There will be more infrastructure, properties/cities to be build along those town connecting / along the HSR lines.

Secondly, as China tech up, it will become even more energy hungry than before, and more people will go into the energy sector - which means more coal miners (even though Chinese authority are trying to shut them down but as reality of energy requirement hits) and workers in mining sector. More workers to build energy infrastructure - power plants, power lines, delivery systems...etc. And even more workers to maintain these infrastructures.

It doesn't matter if wage is rising - the labourers are barely catching up with the CPI. And they will soon hit the middle income trap as companies and corporations looking for cheaper alternatives (like the news indicated - robotics....or moving factories to third world countries) to maximize profit. This will in turn create downward pressure on wages - as seen in Taiwan, America, Japan... where wage largely stagnated or even going backwards.

I have recently visited China and the Chinese I have talked to all said the same thing - you can't survive on one labourer wage alone and nevermind retirement! The biggest problem with this is that majority of migrant labourer are poorly educated, and being aged worked (in their 40s) means the prospective is extremely limited - they can't be expected to go back to school, nevermind going to university to get a degree. It is precisely because of this they will be trapped in their predicament as labourer for the rest of their live. If they are smart - they might save up and invest by opening up shops or restaurants, but China's business/service sector is already highly saturated - if you ever visit China you will see what I mean - shops are opening up and closing down due to intense competition on daily basis.

Now - about nannies - remember the current chinese predicament of young couple not wanting kids? There will be so few kids for large pool of people who wants to be nanny which only means more unemployement. Not to mention as China tech up and modernize - there will be more requirements for workers to get "licensed" or certificated which means a large portion of them won't be able to do as they can't afford to go to school (can't afford the time, nor the money).

Also, remember the problem we are talking about is NOT the younger generation where they have the options and the education - the problem we are talking about is the older 40+ yr old migrant workers with limited education. LIke I said previously - as China becomes more affluent - they will want their nannies to be "certified".

Now, you bought up an excellent point!
Perhaps that's a cheapest and most economical policy Chinese government can implement.... to encourage even more smoking and drinking by opening up more bottleshops and liquor stores and create more liquor factories to make it cheap and plentiful!
As these 40+ yr old's prospect become dimmer by the year majority might hit the bottle and thus shorten their lifespan. The Australian government did it before - allowing cheap and plentiful of liquor to flow through aboriginal community and it devastated the aboriginal community as average life expectancy is less than 70 (10 years lower than non-aboriginal). But the problem with this of course is what kind of social impact it will bring when liquor is plentiful. High crime rate, traffic accidents, domestic violence.....it won't just kill the older 40+ generation, it will have collateral effect on the "valued" middle and upper class too as they too may fall victims to them (or victims to the disenchanted migrant workforce). So it will create a breakdown of social order.... not an ideal solution.

I was under the impression that you were talking about who would replace the current labor force, but it sounds like you are instead talking about the condition of the current 40+ laborers in 15 years.

It is kind of confusing. Laborers who retire in 2030 would probably find themselves in similar conditions to those who retire in 2015. I'm not sure what the difference would be, nor why it would be related to the family planning policy. The current crop of 55-year-olds are already affected by that policy.

Please clarify which issue you mean to discuss.

 

[Ultra]

I was under the impression that you were talking about who would replace the current labor force, but it sounds like you are instead talking about the condition of the current 40+ laborers in 15 years.

It is kind of confusing. Laborers who retire in 2030 would probably find themselves in similar conditions to those who retire in 2015. I'm not sure what the difference would be, nor why it would be related to the family planning policy. The current crop of 55-year-olds are already affected by that policy.

Please clarify which issue you mean to discuss.

I thought I was very clear about this :

Wow, that is worrying, I didn't know the problem is this severe. 43.5% of the migrant workforce is over 40, that means in a little more than 15 years most of them will not be able to work or will be looking at retiring.

Perhaps you should pick up a pair of reading glasses?

The issue is always about the migrant workers. And they are number in hundreds of million. 262.61 millions to be exact (says Google and this report)


"At the end of 2012, the number of migrant workers in China increased by 3.9 percent to 262.61 million, and the average salary of migrant workers rose 241 yuan ($39.37) to 2,290 yuan per month. May 28, 2013"

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I thought I was very clear about this :





Perhaps you should pick up a pair of reading glasses?

The issue is always about the migrant workers. And they are number in hundreds of million. 262.61 millions to be exact (says Google and this report)


"At the end of 2012, the number of migrant workers in China increased by 3.9 percent to 262.61 million, and the average salary of migrant workers rose 241 yuan ($39.37) to 2,290 yuan per month. May 28, 2013"

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It's not like the migrant workers are stuck in only one particular set of skills for life or else they will go hungry and start rebelling. Some can do other jobs that doesn't required a lot of education and some could also go into small businesses. The Chinese are active and hard working, that means they don't sit around and wait for a hand out. They are smart enough to adjust their lifestyle according to the times and will adapt to any economic situation because of their resourcefulness and resiliency.

 

[solarz]

I thought I was very clear about this :

Perhaps you should pick up a pair of reading glasses?

Yet your post was in reply to an article about fully automated factories, so I assumed that you were talking about China's labor market instead of the condition of its workers.

In any case, I still don't see the relation with the family planning policy? Why do you think the plight of the current labor workers in 2030 will be much different from the plight of labor workers retiring in 2015?

 

[solarz]

It's not like the migrant workers are stuck in only one particular set of skills for life or else they will go hungry and start rebelling. Some can do other jobs that doesn't required a lot of education and some could also go into small businesses. The Chinese are active and hard working, that means they don't sit around and wait for a hand out. They are smart enough to adjust their lifestyle according to the times and will adapt to any economic situation because of their resourcefulness and resiliency.

Indeed! We don't need to wait 15 years to see this. Just look at what Chinese workers "retiring" today choose to do. They go into other sectors if they can: taxi driver, security guard, start their own small business, etc.

In fact, many (if not most) of them have probably saved up enough money to retire comfortably (relatively) in their village, and their children (they likely have 2) are in the labor force sending money home.

Sure, it's not as comfortable a life as in North America, where you can pick up pension cheques, but it's not a humanitarian disaster either.

 

[solarz]

To be more accurate, this cycle has been played out already, and it goes something like this:

1- young rural people go to the city to find work
2- these migrant workers get married, have kids, and send them back to their villages to be raised by grandparents
3- those kids grow up and go to the city themselves to find work
4- the previous generation of workers return to their villages to care for their grand kids, thus repeating the cycle

 

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To be more accurate, this cycle has been played out already, and it goes something like this:

1- young rural people go to the city to find work
2- these migrant workers get married, have kids, and send them back to their villages to be raised by grandparents
3- those kids grow up and go to the city themselves to find work
4- the previous generation of workers return to their villages to care for their grand kids, thus repeating the cycle

And with a flush of cash they all will use either the old rail systems, airplanes, new roads or HSR to get home for the Chinese New Year. Result in more domestic spending and keeping the economic wheel turning in large numbers to come in China.

 

[Ultra]

Yet your post was in reply to an article about fully automated factories, so I assumed that you were talking about China's labor market instead of the condition of its workers.

In any case, I still don't see the relation with the family planning policy? Why do you think the plight of the current labor workers in 2030 will be much different from the plight of labor workers retiring in 2015?

Because of the age difference. In 2015, these people are in their 40+, while in 2030, they will be in their 60+. It is like the retiring of the baby boomer generation which is creating a massive pressure on the social security and medical service field in the west. For China, there is a "massive cliff" - the baby boomer and then the sudden drop due to one child policy which creates this massive difference. For example, before the one child policy a family would have 6 to 10 children (according to my in-laws), after the policy is enacted, you are forced to just one if you live in the city (they are less stringent in the countryside, or if you are minority). This means that for the child of one child policy he has to support 2 parents while working, or 4 parents if he got married.

And I see the problem as when they won't be able to work and requires supports as their health declines due to advanced age.

 

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Because of the age difference. In 2015, these people are in their 40+, while in 2030, they will be in their 60+. It is like the retiring of the baby boomer generation which is creating a massive pressure on the social security and medical service field in the west. For China, there is a "massive cliff" - the baby boomer and then the sudden drop due to one child policy which creates this massive difference. For example, before the one child policy a family would have 6 to 10 children (according to my in-laws), after the policy is enacted, you are forced to just one if you live in the city (they are less stringent in the countryside, or if you are minority).

And I see the problem as when they won't be able to work and requires supports as their health declines due to advanced age.

Yeah but cost of living in China is far lower than in the US. That includes food and medicine. China is moving towards a more robust economic growth that doesn't required a whole army of hundreds of millions of migrant workers to do the jobs of robots and 3D manufacturing could do.

A company in South China’s Guangdong province is building the city’s first zero-labor factory. It’s an effort to address worker shortages and rising labor costs, but the rise of semi-autonomous “smart factories” could be a sign of things to come, in China and elsewhere.

Photo: Robots with intelligent sensors examining products (Gov.cn)
As China Daily is

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, local authorities in Guangdong are introducing its “robot assembling line” strategy. To start, private company Everwin Precisions Technology Ltd is expecting to deploy 1,000 robots by the end of the first phase of the zero-labor project. According to its board chairman, Chen Qixing, the company will reduce its workforce by 90%. So instead of employing its current 2,000 workers, the company will require just 200 employees to operate software systems and administration. Owing to a severe labor shortage and mounting labor costs, similar projects may be unveiled elsewhere around the Pearl River Delta.

China’s shrinking workforce may be a natural consequence of demographic trends, but it’s also likely the result of economic globalization. As the middle class emerges in China, so too do salary expectations and the desire for jobs outside the manufacturing sector. What’s more, the demand cannot be met through the influx of migrant workers. To stave off catastrophic production short-falls, China’s economists are advocating for technology upgrades and the use of smart robots.

To that end, the local government in Guangdong will invest the equivalent of $152-billion to replace humans with robots within three years. Robotic fleets could appear in as many as 2,000 companies across the province, in addition to two advanced industrial bases for robot production.

With factories run almost entirely by robots, it will become increasingly difficult for manufacturers outside of China to compete. Owing to similar demographic and economic trends elsewhere, this may force companies outside of China to adopt similar strategies. At the same time, advances in automation are increasingly poised to remove humans from assembly-line work. It’s not going to make sense for companies to maintain a workforce when it can just use robots. The zero-labor factories in China are likely just the start of what’s going to be a global trend.

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