Just four years from now, China will pass a milestone. Its huge workforce will peak and start shrinking. This will make it more difficult for the world's second largest economy to continue the turbo-charged growth that has played a key role in the rise not just of China, but also its Asia-Pacific trade and investment partners like Japan. They depend heavily on exports to the Chinese market.
The problem is, China is getting old before they get rich. Japan is getting old, but they are wealthy. If Japan can't navigate this demographic path, what hope does China have?
Until now, much of China's growth has been based on the "Lewis turning point" that reflects direct inputs of new workers rather than more efficient use of existing workers. Once the direct input slows, wages rise and the comparative production advantage erodes. As I liked to say, take the most efficient peasant and take him from a farm and put him in the most inefficient factory and the GDP he produces goes up.
The years 2050 and 2100 may look very different from today where anybody who is anybody tries to predict when China takes over our top spot on the globe.
China has a lot more people than we do. Yet they may not have enough workers to complete their rise even though they've made tremendous progress.
If China was our friend, I'd be sad about this milestone since a loss of their prosperity will reduce ours (and Japan's and everyone else, at least a bit). But I have no idea what China wants to be. So to be on the safe side, I'll be relieved when China hits this milestone and passes their peak labor force that will slow their rise.
