May 5, 2022Liked by Noah Smith

The reason Chinese workers retire in their mid-50s is a result of a deliberate policy. Grandparents are expected to leave the workforce to be the primary adults raising their grandkids. Their adult children -- ostensibly in their working prime -- are thus freed up to work harder and longer, secure in the knowledge that Grandma and Grandpa have the kids covered.

Raising the retirement age would mean the country would need to seriously up its number of child care workers. It would also dismantle the strong family ties and cultural continuity inherent in the current system. The timing seems particularly bad now that the one-child policy is nearly a decade in the past, and Chinese families are having more kids, which means they're more reliant on this system, not less.

This policy doesn't exist in a vacuum; and the reason it exists needs to be accounted for in any discussion of changing it.

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There are also some people who think China will be able to raise their TFR again. The argument generally goes that just like they were able to crush fertility rates due to their strong social control and heavy handed one child policies, they will be able to leverage their agitprop to generate a pro-natal society, and if that doesn't work they can just fall back on policies that are equally as heavy handed as the one child rule, such as restricting abortion or placing taxes on childless adults.

I am skeptical. Western interventions have shown that pro-natal policies can work, but even wide ranging support structures have surprisingly limited effect. Tax rebates and free kindergartens work and are important, but can only do so much compared to other economic trends and societal expectations. "Negative" policies such as restricting access to abortion have probably little to no effect (though that may help with the gender balance). They obviously can't ban contraceptives. Banning after school online courses could help let's see how that works out.

Using their control over societal opinion isn't going to be very effective either. By now having one child is the norm, and the opinions I have heard from pro-natal advocates are essentially conservative boomeresque ramblings that are entirely divorced from the reality of young Chinese couples. Few young chinese women are interested in playing an entirely subservient role to their husbands and place their career on hold to bear and raise more children.

To raise their TFR to more manageable levels, China needs, in that order: happier mothers, happier families, and a happier society. That means more affordable homes, more support for families, and a more equal society that doesn't delay the career of mothers. It currently pulls sone of the right levers, but simply not enough of them.

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“Between seemingly never-ending Covid lockdowns, a protracted crash in the vast real estate sector, Xi’s weird crackdown on internet companies, and the fear of Russia-like sanctions in the event of a conflict.”

1) Is probably a passing thing, although I do agree it’s worrying that the CCP is stupid enough to cling onto zero-covid in 2022. If they will keep this up I do not know, but it can’t possibly last forever and I believe a lot of the investor “vibe shift” comes down to the dramatic graphs and images coming out of eg Shanghai.

2) A number of smart and basically mainstream sources have said that the government engineered the real estate crisis by tightening credit standards in order to rein in an overleveraged and inefficient sector. This seems basically right to me.

3) I agree is weird and probably counterproductive. Not completely sure after reading Dan Wang, though.

4) You need an actual conflict for that, and China’s read of Ukraine is probably that it shouldn’t do this yet.

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Is there a consensus about the impact of democratization on South Korean and Taiwanese growth rates? I don't have a guess about which direction this would go (assuming there was any impact at all).

Democratisation seems highly unlikely for China given the political trend under Xi's leadership. However, I feel it's worth including in speculation about hidden reservoirs of potential growth.

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Great article. I think large, continental countries always struggle with creating a common prosperity. Of the world’s most populous countries, the USA is really the only one which has a modicum of prosperity across the board. I think smaller polities tend to be better governed and more prosperous. This is largely due to costs of sustaining huge populations.

A great writer on this topic is Michael Beckley from Tufts University. One of his main arguments is that analysts need to look at net value produced by an economy. Large economies produce a lot at scale but they also consume a lot leaving little surplus.

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It may be that the Chinese population peaked in the early 2000's. according to offical source, their population was supposed to halve by the end of the century as of early last year, but new data suggests that the population will havle by 2070. 2070 is fairly soon.

Peter Zeihan says that China has overcounted their populatin by about 100 million, all born after the one child policy and probably mostly women.

Yi Fuxian is also a good scholar to follow about Chinese demographics.


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The real-estate debt crisis is significant and now a youth unemployment problem. Many issues in China, but they are building a Neo-Surveillance Capitalism essentially nobody will be able to compete with over the next 30 years. As they boost up their PhDs in very specialized domains, they will essentially start to lead innovation at scale. However it will take some time before this is evident to most people.

As a writer in A.I, quantum computing and futurism, I can tell you China's ascent is well underway due to their long-term strategy and planning in technology and integrating new forms. That their CBDC alone is so many years ahead of other central banks is evidence of this.

China's 'common prosperity' and social credit campaigns will continue and it will be a very modulated form of capitalism with access to far more data. If data is indeed the new oil, China's A.I. will be king in the second half of the 21st century, whatever their other problems and obstacles may be.

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I live in southern China, and this post seems right to me, but...

The experience of living in a nice part of China at the moment is that the cities are very futuristic. Zero cash, much more delivery of food & groceries than in the UK (I'm British, so that's my developed country reference point). Lots of electric cars on the roads.

On that level, it feels like there's lots and lots of space for growth: spreading the innovations that are present in the big cities out to the rest of the country will create a lot of value.

Similarly, there are a bunch of glaring holes in the market, that *could* create growth, though there are significant political problems. Things like film and TV, games, writing... cultural production in general is vastly underpowered at the moment, because of the dead hand of censorship. The hope is that as China gets richer and more confident, its leadership will no longer feel so much paranoid need to control what we think, and can gradually relax the censorship, creating a virtuous spiral of increasing productivity and freedom. Obviously that's an optimistic case, but living in hope is nice!

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The fact that the commentariat shift their position seems less a sign of intelligent people reacting in a cogent manner to events as they pass and looks a bit more like people who don't 'get' the Chinese economy shifting from one extreme (excessive optimism) to the other (Eyore-like pessimism). In times like this, I find it infinitely easier to respect the opinions of scholars like Tooze or Pettis (if you want a less bullish opinion), who have a clear paradigm for how they view the Chinese economy that goes beyond getting caught up in cyclical market theatrics.

Regarding demographics, your point on whether people really do leave the workforce after 60 or just downshift to lower-quality jobs probably isnt relevant in this instance. China and Japan are too different socially/culturally/economically for us to make assumptions on the former based on the experiences of the latter. On the overall point Re retirees: Raising the retirement age pushes back the deluge another decade and potentially staggers it in such a way that the pension pot could last a bit longer. Is it a 'fix'? No. But its a comparatively low-cost remedy that comes with outsized gains.

I think we also need to be careful of Ozimek's analysis. China isn't the US and the Chinese 60+ cohort is not the same as America's 60+ cohort. On average, they dont occupy equivalent positions, they don't have have similar levels of net wealth and nor do they work similar jobs to their respective younger counterparts. The average Chinese 60 year-old was born in 1961-62, entered the workforce pre-Deng (or at the 'turn-of-Deng' if you like) and is far less likely to be in a senior corporate or teaching position. Sure, Ozimek's findings might hold over the coming decades as more skilled generations ascend the ladder but we'll have to wait until at least 2050 to see how the post-1980's cohort adjust. In the medium-term, however, this is not relevant as the average 60 year-old street-sweeper and/or assembly-worker is hardly going to be passing on much knowledge to or (inversely) stunting the growth of your new, zany, 25 year-old corporate drone.

Re 'young' workers, I would keep in mind that over the coming decades, each cohort is likely to be far better educated than the last. You said something along the lines of "some of the biggest gains in China’s educational achievement came at times when its productivity growth was...slowing", which ignores the obvious lag effect. A kid going into tertiary education in 2010 entered the workforce after 2018, needs 5-10 years to find their feet and can't start 'contributing' to the lifting any TFP level until at least the middle of this decade! A bit funny to try and pin the productivity deficit of the 2010s on his/her shoulders. Let's, again, wait a while before we start casting aspersions on the Chinese education system.

All in all, the point Re demographics is quite simple. A workforce of 600m uneducated laborers and 100m 'professionals' (2015-20) is infinitely less efficient/productive than a workforce of 300m laborers and 300m professionals (2040). There's not a lot to unpack here and whilst one can try and chip away at the margins of the picture ('but how skilled will these new engineers even be?'), the image is irrefutable ('a hell of a lot more skilled than the assembly-line workers they are replacing').

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Relevant to this discussion, Tanner Greer posted a chart showing where China's growth comes from:


You can see that TFP is down as is population growth. Human capital just isn't a big contributor. A massive amount is from capital spending, but how much more infrastructure and capital investment can they do? There's just no way for China's annual growth to stay close to 5% for more than another decade at most.

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Noah writes, "how rich you are relative to top countries like the U.S. depends entirely on how efficiently you use your resources of labor and capital."

But what if that's only part of the "rich country" GDP story? What if the reason that other countries never "catch up" is because the rich countries are as rich as they are not so much as a result of their own productivity but the extent to which they are battened upon exploitation of the Global South?

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You mentioned how older workers tend to lower the productivity of firms and industries in China. Could you attribute any of that to how that generation grew up? A 62 year old would have been born during the tail end of Mao's great famine. Generations of younger Chinese kids are growing up to be a lot taller than their parents and grandparents because of better childhood nutrition. I think it could be possible that the lower productivity of the older generation can be attributed to this lack of nutrition, and that in the next 20 years the old people that were acutely harmed by these economic traumas at a young age phase out of the workforce.

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Basically, there's the tailwind of increased tertiary education/education in general (Chinese and all other East Asian families are culturally inclined to invest a lot in education) vs the headwinds of everything else. (I don't think TFP in the economy tells us much about the efficacy of developing human capital at the moment; there is a lag where more human capital should lead to better productivity later.)

And that assumes no big eff-ups, which authoritarian dictators are wont to misstep in to (see Putin's crazy invasion of Ukraine, the current COVID lockdowns in China, and even the 1-child policy itself).

Anyway, I think that China's economy will top out about equal to the US or maybe a little bigger, but then fall behind in relative terms. For both the US and China, the biggest threats to continued growth are internal (eff-ups by the head in China; tearing itself apart and stopping immigration in the US).

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Downplaying the benefits of raising the retirement age, a standard neoliberal (not pejorative) policy recommendation for any ageing country, is just plain weird. A policy is either good or not and most analysts seem to think it would be good, on net, for a bunch of European countries. No idea why China should be super different, even if its not a complete panacea. That productivity + age correlation graph is also ridiculous.

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