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China Demographic Dividend

China Demographic Dividend. What drives China’s Growth?. Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization. Reform and Restructuring. From Communist to Socialist with Chinese Characteristics

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China Demographic Dividend

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  1. China Demographic Dividend

  2. What drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  3. Reform and Restructuring From Communist to Socialist with Chinese Characteristics From Central Planning to Market Driven Economy From Closed-Door policy to Open-Door Policy From Dictatorship to “Centralized Democratic” Decision Making Privatization Joke about car at cross roads and whether to turn left or right

  4. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  5. What Drive China’s Growth? Urbanization -- 1.5 million per month Industrialization -- Raise productivity -- Monetize economic activities

  6. Urban, but Left Behind: Impact on Farmers http://www.nytimes.com/video/world/asia/100000002379242/urban-but-left-behind.html Video http://www.nytimes.com/video/world/asia/100000002379242/urban-but-left-behind.html Urban, but Left Behind

  7. Urban / % of Total Population Government wants faster growth Source: United Nations, CLSA Asia-Pacific Markets

  8. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  9. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  10. The demographic dividend The demographic dividend is a window of opportunity in the development of a society or nation that opens up as fertility rates decline when faster rates of economic growth and human development are possible when combined with effective policies and markets. The drop in fertility rates often follows significant reductions in child and infant mortality rates, as well as an increase in average life expectancy.

  11. As women and families realize that fewer children will die during infancy or childhood they will begin to have fewer children to reach their desired number of offspring. However, this drop in fertility rates is not immediate. The lag between produces a generational population bulge that surges through society. For a period of time this “bulge” is a burden on society and increases the dependency ratio. Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall and older generations having shorter life expectancies, the dependency ratio declines dramatically.

  12. This demographic shift initiates the demographic dividend. With fewer younger dependents, due to declining fertility and child mortality rates, and fewer older dependents, due to the older generations having shorter life expectancies, and the largest segment of the population of productive working age, the dependency ratio declines dramatically leading to the demographic dividend. Combined with effective public policies this time period of the demographic dividend can help facilitate more rapid economic growth and puts less strain on families. This is also a time period when many women enter the labor force for the first time.[1] In many countries this time period has led to increasingly smaller families, rising income, and rising life expectancy rates.[2] However, dramatic social changes can also occur during this time, such as increasing divorce rates, postponement of marriage, and single-person households.[3]

  13. End of Growing Demographic Dividend Peak 2012 Dividend Dependency

  14. Following Japan

  15. “Scissors” crisis of aging

  16. Dependency Ratio

  17. China currently better then US

  18. Replace Brawn with Brains?

  19. Demography and Education Demography Dividend College Enrollment China’s Baby-boomer Generation Young and Educated With money, Will spend

  20. Brain power: US vs China Science and engineering PhDs Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets

  21. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  22. Saving is Virtue! Total Household Deposit in China US$5.13 Trillion Total Deposit Waiting to make deposit

  23. Household Savings / Disposable Income Higher Savings Ratio, Higher Capital Formation, Higher Growth Rate Source: Euromonitor, CLSA Asia-Pacific Markets

  24. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  25. Globalization China Accounts for 10% of Global Trade

  26. Drivers for the Growth in Next Decade? • Reform and Restructuring should continue, but no more low hanging fruits • Urbanization and Industrialization another two decades to go but many UNK UNK’s • Demography Dividend and Education no more labor growth, productivity must go higher • Savings and Capital Formation need less savings to drive domestic consumption • Globalization slower export growth, trade balance

  27. No More Double Digit Growth

  28. Power of Compounding

  29. Myth 1: Massive Real Estate Bubble • “A reported 64 million empty apartments in China’s Ghost Towns” – Financial Times Blog • “30 billion sf of office under construction, a 5-foot by 5-foot cubicle for every Chinese” – Jim Chanos • “It costs you $1 million to buy an apartment in Beijing or Shanghai”

  30. “Housing Bubble” in China Supply and Demand in Last 10 Years (in millions) Empty Complex

  31. “Housing Bubble” in China Source: National Statistic Bureau

  32. “Office Bubble” in China Myth: “30 billion square feet of office under-construction” Facts: 18 billion square feet all together, residential, office, commercial. Facts: office under-construction is 1.3 billion square feet, not 30 billion.

  33. “Housing Price Bubble” in China Source: Merrill Lynch Economic Research Myth: $1 million apartment in Shanghai and Beijing Fact: Average price is 300K-400K in BJ and SH, and nation wide average price is less than $80,000 in urban area.

  34. Chinese Cities are Quite “Small”

  35. Another Angle: Mortgage Loan Size Mortgage to GDP: China 15%, US 82% Source: Merrill Lynch Economic Research

  36. Myth 2: China is Export Driven

  37. Gross Export vs. Net Value-Added Average Selling Price $400 Ex-Factory Cost: $200 (reported in China’s export) Value added in China: $6 (reported in GDP)

  38. True Export Share Source: UBS Economic Research and Waddell & Reed Estimate

  39. GDP Composition Source: Waddell & Reed Estimate

  40. Myth 3: China is Investing Too Much Chinese Consumption as % of World Total - 2010 Source: BNP Paribas Research

  41. China’s Capital Stock Total Length of Railway Total Number of Airports Total Length of Paved Roads Number of Vehicles per 1000 People

  42. Per Capita Steel Production

  43. Drivers for the Growth in Next Decade? • Reform and Restructuring should continue, but no more low hanging fruits • Urbanization and Industrialization another two decades to go but many UNK UNK’s • Demography Dividend and Education no more labor growth, productivity must go higher • Savings and Capital Formation need less savings to drive domestic consumption • Globalization slower export growth, trade balance

  44. Uneven Spatial Development

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