China: Who will make all the stuff I don't need?

China’s three-decade-old, one-child policy will accelerate declines in the workforce, forcing companies to upgrade to higher-value products in the way Japan did in the 1960s and 70s. China may have as little as five years to make the transition to avoid a slump in economic growth, according to Sun Mingchun, an analyst at Daiwa Capital Markets in Hong Kong and former economist at China’s State Administration of Foreign Exchange, part of the central bank. He said growth may decline in 2016-20 as low-cost producers fail and investment falls away.


The pool of 15 to 24-year-olds, a mainstay for factories making cheap clothes, toys and electronic products, will fall by almost 62 million people to a total of 164 million in the 15 years through 2025, United Nations projections show. The demographic shift is a result of the one-child policy implemented in 1979.

China’s income growth and stage of economic development is similar to Japan in 1969 and South Korea in 1988, before their rates of expansion fell, according to Morgan Stanley. Japan’s growth slid to an average 5.2 percent in 1970-79 from 10.4 percent in the previous decade, the bank said. South Korea’s expansion cooled to 6.3 percent in 1989-98, from as much as 12.3 percent during the previous decade, government data shows.

Only five economies -- Japan, South Korea, Taiwan, Hong Kong and Singapore -- have moved from middle-income nations to developed country status while maintaining relatively high growth rates, according to Nobel laureate Michael Spence, a professor of economics and business at New York University’s Stern School of Business.