Wednesday, June 15, 2011

China's Demographic Time Bomb

One of the issues that Joe discussed (US visiting professor of economics at Fudan, also sits on real estate investment boards) is what is going to happen with China's own IP when it starts having it? Because right now they are ripping off other people's patents and copyrights and copying books and tv shows and movies like they don't are about the licensing restrictions. In 5-10 years what is going to happen when they create their own IP? How are they going to protect it, if they don't respect other people's IP?

There is also a demographic time bomb waiting to happen, as the largest part of the working population severely declines starting in 2015, because of the one child policy, labor will soon be scare and expensive. Even if they dropped the one child policy today, there would be a gap between '15 and 2026 when the children come of age to work, at the age of 15. So a big part of the massive push for outside investment and manufacturing in china was because they had so many people who were in the working age range from 1990 until now that were born during the great leap forward.  

So we are likely to see a big slowdown after 2015 in the China's growth because there are fewer workers. It may also be the only chance it gets to transition to a service economy from a manufacturing economy, but it depends on the transition to the new party in 2012; we don't know if this new leadership is going to make a mess of things or if they are going to be able to handle the delicate transition. Especially with the amount of civil unrest going on and shifting the consumption away from real estate and toward a consumer market like the US.

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