Chinese Economics Thread

Ultra

Junior Member
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The benefits of age

China’s demographic transition will create opportunities as well as challenges. Population aging and the growing pile of pension funds are already forcing changes in the capital market and financial services sector. For example, Guangdong recently entrusted Rmb100 bn of its largely unmanaged provincial pension funds to the National Council for Social Security Fund, which may invest some of the capital in the stock market. Without well-functioning capital markets, savings cannot be put to productive use and may even lose their value. An aging society will require a more sophisticated investment sector, thereby presenting new opportunities for financial managers and investment services.

Another big growth area will be health care. Establishing better long-term insurance plans will be critical in a country with few young family members to care and provide for the old. Currently over 40% of all middle-aged Chinese couples have only one child, a figure that rises to two-thirds in cities. A sound social safety net needs to be put in place before the economy feels the full force of deteriorating demographics. That means extending and improving the fledgling national pension scheme, and creating a universal medical insurance program that is portable across regions.

Reforming the health care system is a daunting challenge. Over the past decade China made important strides to extend health care coverage across the population—yet serious challenges remain. For individuals, the two big issues are lack of access to decent treatment and paying for its often exorbitant cost. For the government, the major challenge is creating a fiscally sustainable public health care system. Funding remains a significant issue, but the system also suffers from the inefficiencies of bureaucratic control and price distortions, which set the cost of labor artificially low. As a consequence, hospitals routinely attempt to profit by over-prescribing medicine. Since elderly people account for the largest share of health care costs, getting these reforms right has important economic implications.

Preventing a train crash

Fiscal imperatives brought about by demographic changes are also set to change the political landscape. Over the next 20 years, the ratio of workers to retirees (presuming workers continue to retire at 60) will drop precipitously from roughly 5:1 today to just 2:1. Such a drastic change implies that the tax burden for each working-age person must rise by more than 150%, assuming that the government maintains its current level of tax income. During the past decade, tax receipts grew at twice the rate of GDP—but the happy days are set to end. In addition, mounting expenditure on social entitlements—especially pensions and health care—will put leaders in a difficult position. If the government demands that taxpayers pay more, the public will demand better scrutiny of how their dollars are collected and spent. The government will have no choice but to cut corruption and waste, and to deliver public services more efficiently. The alternative is a crisis of governance.

In many respects, China’s demographic transition is a reason for celebration: it reflects an unprecedented decline in mortality and enormous economic development. It has allowed women to slough off their traditional status as breeding machines and helped millions of students to gain a proper education. But the rapid decline in fertility rates has gone too far, and China will have to make major structural reforms to offset the impact. After years of demographically powered high-speed growth, the Chinese bullet train is racing towards a demographic precipice. The challenge for policy makers is to prevent it from careering over the edge.

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cyan1320

Junior Member
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China’s currency is about to get a huge global endorsement
"Long pegged as a currency manipulator, China might be about to get a big stamp of foreign-exchange credibility. The International Monetary Fund is reportedly close to calling the Chinese yuan fairly valued. That’s something that hasn’t happened in more than a decade, and it would come despite
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the White House, according to
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."

 

solarz

Brigadier
Unless Chinese retire in their 50s I think your calculation is wrong (mine too!).

The One-child policy was introduced in 1978 and enacted and come into force on September 18th, 1980.

Around the same time - on September 10, 1980 the Marriage Law of the People’s Republic of China was adopted as the modified law code from the 1950 Marriage Law. The 1980 law states that the age requirement for marriage is 22 years of age for men and 20 years of age for women, “late marriage and late childbirth should be encouraged.” This provision in the law shows a change from the 1950 law which set the age requirements at 18 and 20 for women and men respectively, showing state support of marriage at a later age.

That means, the last generation before the one-child policy comes into effect would have gave birth to their kids roughly one year after September 1980 at the earliest.

Now, at the age of 20 (22 for men) in 1980, they would be 55 (57 for men) this year. So they are still a few years from the retirement age of 60, but you said this should happened already 5 years ago! That makes your assumption of retirement age to be 50 (and 52 for men)!?

So the actual fall off point should be around 2018 at the earliest, and 2020 to see the full effect of it (when both sexes of pre-one-child policy generation retiring enmass and the balance is tip the other way).

As I stated before, I think this problem will intensify - they actually have a name for it too in China: it is called "Four-two-one" problem".

"The 4-2-1 phenomenon (Chinese: “421”
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) or 421 generation (421时代) is an effect of China's
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in which an employed grandchild is responsible for the care of both parents and four grandparents.
"

"As the first generation of law-enforced only-children came of age for becoming parents themselves, one adult child was left with having to provide support for his or her two parents and four grandparents. Called the "4-2-1 Problem", this leaves the older generations with increased chances of dependency on retirement funds or charity in order to receive support. If personal savings, pensions, or state welfare fail, most senior citizens would be left entirely dependent upon their very small family or neighbours for assistance. If, for any reason, the single child is unable to care for their older adult relatives, the oldest generations would face a lack of resources and necessities."



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No, I did not calculate this. I am living this.

I am an only child. My wife is an only child. My parents are over 60 years old. Both my wife's parents are retired, or due to retire this year. Same thing for our uncles and aunts.

What wikipedia and armchair quarterbacking doesn't tell you is what things are actually like in China. There are quite a few factors you are missing.

First, women retire at 55, not 60. Your calculation is wrong because you are assuming the minimum marriage age to be the common age of marriage. In fact, by definition, the average age of marriage will be higher than this minimum! If my mom had remained in China, she would have retired 9 years ago, and my dad 5 years ago.

Second, the retirement age really only applies to salaried workers. Migrant workers do not follow this. They effectively retire when they have to go back home to raise grand kids.

Third, rural families have been allowed a second child if their first was a girl for decades now. That means these young people are already in the work force.

Fourth, the Chinese people themselves are well-aware of the 4-2-1 problem, and have long taken measures to protect themselves. Young Chinese work extremely hard because they know they need to support their parents and their children at the same time. This is already an ingrained part of modern Chinese culture.
 
China launches new campaign against sex-selective abortions
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One of the related problems to the one child policy which is due to many Chinese people's backwardness in values, which the government has fought to enlighten for decades, is these people's preference for boys over girls. The statistics cited in the article for last year are still very skewed: 116 boys for 100 girls.

This backwardness has ironically made lives even worse for males as they are held back to tend the homestead, severely limiting their opportunities and experiences, while females are sent away to study or work thereby actually having much more opportunities and experiences. Still traditional gender expectations makes these males and females even more incompatible with each other then they already are.

Too little too late is definitely true of the government loosening the one-child policy. But even more importantly, they really need to step up enlightening all the people whose values are stuck in dynastic times by rubbing these statistics and the younger generation's woeful stories in the parents' faces.
 

solarz

Brigadier
China launches new campaign against sex-selective abortions
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One of the related problems to the one child policy which is due to many Chinese people's backwardness in values, which the government has fought to enlighten for decades, is these people's preference for boys over girls. The statistics cited in the article for last year are still very skewed: 116 boys for 100 girls.

This backwardness has ironically made lives even worse for males as they are held back to tend the homestead, severely limiting their opportunities and experiences, while females are sent away to study or work thereby actually having much more opportunities and experiences. Still traditional gender expectations makes these males and females even more incompatible with each other then they already are.

Too little too late is definitely true of the government loosening the one-child policy. But even more importantly, they really need to step up enlightening all the people whose values are stuck in dynastic times by rubbing these statistics and the younger generation's woeful stories in the parents' faces.

Certainly I would love to see the Chinese people, as a whole, discard old feudal mindsets and embrace more enlightened views. Unfortunately, current trends seem to be working in reverse, and confucianism and concubinage is making a come-back.

On the positive side, the much hyped gender imbalance has not resulted in seismic social upheavals. Instead, it has resulted in more choices for young women, which, on average, means better families. Those men who lose out are those who are unable to compete in the marriage market. These are usually the most economically disadvantaged people.

The other myth is that gender imbalance results in a lot of single young men. It doesn't work that way, because only marriage is 1-to-1. The dating scene is not. Disadvantaged men simply tend to marry later rather than not at all. Population dynamics has proven this prediction wrong.

There is a lot of misunderstanding of the effects of gender imbalance in China. All I can say is, you need to be a part of the current Chinese culture to understand it (and even then, never completely).
 
Certainly I would love to see the Chinese people, as a whole, discard old feudal mindsets and embrace more enlightened views. Unfortunately, current trends seem to be working in reverse, and confucianism and concubinage is making a come-back.

On the positive side, the much hyped gender imbalance has not resulted in seismic social upheavals. Instead, it has resulted in more choices for young women, which, on average, means better families. Those men who lose out are those who are unable to compete in the marriage market. These are usually the most economically disadvantaged people.

The other myth is that gender imbalance results in a lot of single young men. It doesn't work that way, because only marriage is 1-to-1. The dating scene is not. Disadvantaged men simply tend to marry later rather than not at all. Population dynamics has proven this prediction wrong.

There is a lot of misunderstanding of the effects of gender imbalance in China. All I can say is, you need to be a part of the current Chinese culture to understand it (and even then, never completely).

The thing is "concubinage" and mistresses defeat the supposed 1-to-1 limit of marriage, divorce has also become more common. Many women have expressed preference for "part of" a very successful man rather than a "whole" less successful one. I'm also not so sure about disadvantaged men marrying later rather than not at all.

I don't have enough information to make a call but my guess is all these side effects of rampant materialism and inequality probably has a negative impact on the number of children, their moral quality, and social cohesion. Then again such social norms seem to have worked fine for feudal societies the world over for a long time so who knows.
 

solarz

Brigadier
The thing is "concubinage" and mistresses defeat the supposed 1-to-1 limit of marriage, divorce has also become more common. Many women have expressed preference for "part of" a very successful man rather than a "whole" less successful one. I'm also not so sure about disadvantaged men marrying later rather than not at all.

I don't have enough information to make a call but my guess is all these side effects of rampant materialism and inequality probably has a negative impact on the number of children, their moral quality, and social cohesion. Then again such social norms seem to have worked fine for feudal societies the world over for a long time so who knows.

Well remember that "mistresses" are almost always young women. They still want a family when they become older.

Completely agreed on the rampant materialism and inequality, but there are signs that things are changing. I was skeptical at first, but Xi's anti-corruption drive has had a profound impact on luxury consumption. A less overt manifestation of inequality is, IMO, already an improvement.
 

broadsword

Brigadier
"low-end" makes me scratch my head.

Right now, the DJI can be programmed to demarcate its flight path away from sensitive areas. It is the general public whose complaints can lead to more sanctions and throttle the consumer market. And if there is a way to hack the drones flight envelope and telecommunications, the govts will clamp down even more. A DJI and Huawei will be a bad idea if they want to tie up. The market is still small, so the threat of action against DJI for protectionist reason is not going to happen.

The $10b that DJI wants to raise tells us about their ambition. Drones have a lot of industrial applications when the technology becomes available for their applications. DJI is sure to have received a lot of feedback about various industries' needs. They need money to develop the technology that could reach the level of the big defense contractors and leading edge robotic companies.
 
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