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Monday, March 1, 2010




At the Peak

December 22, 2009

The new U.S. Census estimates put Chinese TFR at 1.5 instead of 1.8. According to the Economist who is recently giving increasing coverage to global demographic trends, China's demographic dividend will peak in 2010 as the current trend is about to reverse itself. From 2010 on, the deteriorating dependency ratio will start adversely affecting China's potential for growth.

Source: The Economist

It's still not too late, says the Economist, to relax the one-child policy in order to "salvage the situation". The short term effect of such a measure will be even more dependency ratio deterioration, but after a couple of decades when these children grow old enough to join the workforce, they will mitigate future labor shortages and social crises.

Meanwhile, given the general propensity of China to rapid economic growth and no less dramatic deceleration of its population growth (the workforce will stop growing pretty soon actually), the next superpower is about to transform itself into a huge vacuum machine sucking off labor surpluses from around the globe. Inside China labor shortages will develop and wages shoot up pushing labor intensive industries out of China and generating demand for these products from outside China. In short, after a decade or something, the global economy, and even more so the economies of the third world, may get a friendly push forward from the world's next superpower, and a very massive one on that occasion.



March 01, 2010

It may be happening even faster than we thought...


Factory wages have risen as much as 20 percent in recent months.

. . .

Some manufacturers, already weeks behind schedule because they can’t find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.

Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.

The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.

But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.

. . .

The labor shortage is not benefiting workers just through higher wages. Personnel managers here say they are also abandoning the informal tradition of not hiring anyone over 35 — they say they are now hiring workers up to 40 years old, and sometimes older, despite concerns about whether they can keep up week after week with the rapid pace of Chinese assembly lines.

Source: NYTimes

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