Sunday, September 03, 2023

China's WAP Decline

China's working-age population has peaked. Not good news if you want continued national economic growth.


Via The World Bank, via Paul Krugman in the NY Times. He writes:
"At a fundamental level, China is suffering from the paradox of thrift, which says that an economy can suffer if consumers try to save too much. If businesses aren’t willing to borrow and then invest all the money consumers are trying to save, the result is an economic downturn. Such a downturn may well reduce the amount businesses are willing to invest, so an attempt to save more can actually reduce investment.

"And China has an incredibly high national savings rate. Why? I’m not sure there’s a consensus about the causes, but an I.M.F. study argued that the biggest drivers are a low birthrate — so people don’t feel they can rely on their children to support them in retirement — and an inadequate social safety net, so they don’t feel that they can rely on public support either."
This kind of thing is why macroeconomics is so interesting. And why you can't run government as a business, something some people don't seem able to understand.

1 comment:

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