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No. of Recommendations: 5
1)Aging population & future shift in government spending from investment in country to caring for the aged.
2)Chinese government partial reliance of Chinese population saving habit. Shift in savings habit of the populous. The young do not save much.
3)A shift in Chinese economy to a more consumer driven economy.
4)China has a high debt to GDP load. And a portion of those loans, the amount is unknown, are nonperforming.

What does this portent for the future? Opinions will differ. To me to appears that China has a precarious tricky financial tightrope of a walk to deal with it's problems while a large aging trend & change in saving habits of its population is occurring. The problem with humanity is that they usually either try to project what has happened in the past to what will occur in the future or that situations will remain static & are unchanging. From an investor viewpoint China could be a situation of high risk/high reward. For me, at my age, high risk means zero investment from me.


https://www.brookings.edu/articles/chinas-population-destiny...
As a result of the country’s low fertility rates since the early 1990s, China has already begun experiencing what will become a sustained decline in new entrants into its labor force and in the number of young migrants. The era of uninterrupted supplies of young, cheap Chinese labor is over. The size of the country’s population aged 60 and above, on the other hand, will increase dramatically, growing by 100 million in just 15 years (from 200 million in 2015 to over 300 million by 2030).

Indeed, increased spending obligations created by the aging of the population will not only shift resources away from investment and production; they will also test the government’s ability to meet rising demands for benefits and services.


https://mises.org/library/chinese-savings-vs-american-spendi...
Observing China, we can easily criticize the authoritarian ruling party, but there is one thing the Communist Party is yet to change successfully, and that is the industrious temperament and high savings habits among the Chinese, particularly in the older generation.

Because of high accumulations of wealth, the Chinese will be able to continue construction and exports, and earn foreign exchange to patch up for mistakes in government policies.

https://www.straitstimes.com/asia/east-asia/spenders-not-sav...

those born in the 1990s - Chinese consumers who are a new engine of consumption in China, according to a survey published last week by the consultancy McKinsey.
it found that the post-90s generation - or those aged 27 and below - grew up in a China unknown to their parents. It is one that is marked by extraordinary levels of wealth, exposure to Western culture and access to new technologies.

Growing up as they do at a time of unprecedented wealth and having mainly not experienced the hardship and deprivation of their parents and grandparents,
they are largely non-savers and more willing to spend on themselves.

https://www.abc.net.au/news/2018-08-08/chinas-view-of-trumps...
He says that around a decade ago, China's debt levels were about 160 per cent of the size of its GDP.

"Now it's somewhere between 280 and 300 per cent," he says.


https://www.reuters.com/article/us-china-economy-industrial-...

Nomura economists said the trend will remain down “given weakening domestic demand, already-high financing costs, rising credit defaults and the escalation in the China-US trade conflict”.
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No. of Recommendations: 8
Observing China, we can easily criticize the authoritarian ruling party, but there is one thing the Communist Party is yet to change successfully, and that is the industrious temperament and high savings habits among the Chinese, particularly in the older generation.


High saving habits are only good if the economy offers opportunities to deploy all that capital; if it does not, your economy will look like Japan's post-1990.

A high savings rate is fine for an industrialized economy with a growing working-age population. For a post-industrial economy with a declining working-age population, it is calamitous.
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No. of Recommendations: 10
Observing China, we can easily criticize the authoritarian ruling party, but there is one thing the Communist Party is yet to change successfully, and that is the industrious temperament and high savings habits among the Chinese, particularly in the older generation.

If you don't have a collective safety net (Social Security, Medicare, Medicaid, unemployment insurance, access to insurance, etc. etc.) you have no other option than to save or to rely on your family or extended family. The older you get the more you worry about having enough to make it last to the day you die.

Then there is the question of what you do with your savings. If you put it under your mattress like the French are reputed to do, it won't help the economy because it never becomes investment. Likewise with Social Security, in the USA the Social Security tax is spent by the government. The economic miracle in Chile is partly based on the Social Security contribution being channeled to investment funds.

The Captain
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No. of Recommendations: 17
Yi Fuxian of the University of Wisconsin has an article this week in The South China Daily Post. He notes that since 2000, China’s total fertility rate has been lower than that of Japan and goes on to make comparisons and projections.

Worse than Japan: how China’s looming demographic crisis will doom its economic dream
www.scmp.com/comment/insight-opinion/asia/article/2180421/wo...
China’s median age was 22 in 1980. By 2018, it was 40. That will rise to 46 in 2030 and 56 in 2050. In the US, the median age was 30 in 1980 and 38 in 2018. In 2030, it will be 40, and 44 in 2050.

Note that in the next 12 years the median age will increase by six years. It was young China that closed the gap with middle-aged America. Against a still middle-aged America, can an old China retain its edge? Not as likely.

DB2
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No. of Recommendations: 3
If you put it under your mattress like the French are reputed to do,

Likely no longer true.

https://www.ft.com/content/3d907582-b893-11e7-9bfb-4a9c83ffa...
The French parliament on Tuesday adopted a package of measures for 2018 that included scrapping the wealth levy on everything except property assets — in effect cutting the tax by 70 per cent. A 30 per cent flat tax rate will also be introduced on capital gains, dividends and interests — a longstanding demand from investors and entrepreneurs.


Not to worry though Macron balanced that tax cut with subsidy cut & tax increases elsewhere.

https://www.reuters.com/article/us-france-tax/macron-fights-...
the government’s decision to cut a housing allowance enjoyed by millions of poorer French people

https://www.express.co.uk/news/world/1042724/france-news-emm...
Pensioners have been protesting around France since Mr Macron raised a tax on pensions in January and then blocked an expected rise for inflation.
Last month, he told another unhappy retiree that France would be better off if people “complained less,” adding that pensioners did not realise how lucky they were.
His arrogance problem also seems to be rubbing French voters up the wrong way.


Hm I seem to be getting an inkling to the reasons behind the yellow vest protest.
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No. of Recommendations: 4
China’s median age was 22 in 1980. By 2018, it was 40. That will rise to 46 in 2030 and 56 in 2050.
---------------------------

An unintended consequence of China's one-child policy?

- Pete
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No. of Recommendations: 2
Hm I seem to be getting an inkling to the reasons behind the yellow vest protest.

Yup. A clear failure by the media to brainwash the mob that they will be better off if their pay and benefits are cut, and the money handed to the "job creator class".

Steve
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No. of Recommendations: 1
His arrogance problem also seems to be rubbing French voters up the wrong way.
An arrogant Frenchman? I'm shocked, SHOCKED I say!!!

An unintended consequence of China's one-child policy?
I would imagine the Chinese knew this could be a problem (they're far better at playing the "long game" than us Westerners), but underestimated the severity of it, figuring the Japanese example wasn't applicable to them since they still needed so much economic growth just to catch up.
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No. of Recommendations: 2
I would imagine the Chinese knew this could be a problem (they're far better at playing the "long game" than us Westerners), but underestimated the severity of it, figuring the Japanese example wasn't applicable to them since they still needed so much economic growth just to catch up.

They are as you suggest in no hurry. They spend far less of their GDP on the military than the US does. They don't need lots of tanks, aircraft and warships now that will be old and out of date in 20 years when the perceived 'enemy' falters. Better for them now to build the economy and start having more children that will be able to build or man the new weapons systems of the future?

Anymouse
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I thought China had a much higher Social Security rate than the U.S.?

https://tradingeconomics.com/china/social-security-rate
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He says that around a decade ago, China's debt levels were about 160 per cent of the size of its GDP. "Now it's somewhere between 280 and 300 per cent," he says.

Yowza!

DB2
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No. of Recommendations: 2
I thought China had a much higher Social Security rate than the U.S.?

That is misleading because it does not apply to everyone. In some Chinese documentaries they comment on how the government controls where people can live. If you don't have a license to live somewhere you don't get government benefits if you move there -- illegal aliens in their own country!

Another reason why that is misleading is that the saving habit comes from the old regime when everyone was poorer. I read that today the young save less than the old and that's because the young are better off than their elders an less fearful of the future.

The Captain
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No. of Recommendations: 1
Haven't you contradicted your own prior post when you assume SS is to blame for our lack of saving and assume that younger Chinese save less because they are less fearful of the future? Do actually know anything about China?
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No. of Recommendations: 2
Haven't you contradicted your own prior post when you assume SS is to blame for our lack of saving and assume that younger Chinese save less because they are less fearful of the future?

No.

Do [you] actually know anything about China?

Yes.

The Captain
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Thank you for recommending this post to our Best of feature.

High saving habits are only good if the economy offers opportunities to deploy all that capital; if it does not, your economy will look like Japan's post-1990.

Ya got the rec for that.

Too often I see "the rich" verbally depicted on this board as living like Scrooge McDuck:
https://ae01.alicdn.com/kf/HTB1eHh8LXXXXXb5XFXXq6xXFXXXh/S13...

The truth is money has to be put to work to be worth anything but toilet paper and paper weights.

Every rich person you've ever heard of, who didn't inherit their wealth, worked there a$$ off getting rich.
https://en.wikipedia.org/wiki/List_of_richest_Americans_in_h...

Desert (yes, show business and sitting behind a desk making decisions is work) Dave
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