Thread by @ElbridgeColby

U.S. shouldn't put its bets on China's demographics leading to near/medium-term decline.

I'm not an economist but was exchanging notes with someone who is a very good one. Some key points on this. 1/

A declining working-age population generally portends slower economic growth, as observed in Japan and Europe over the past decade.

But while demographic headwinds will eventually catch-up with China, internal migration should push the day of reckoning far into the future. 2/

Most of the growth in China’s effective labor force over the past 20 years has come from urbanization, with more than 270 million people leaving the countryside for employment opportunities in cities over this period. Even after this massive influx...3/

37.5% of China’s population (530 million people) still lived on farms at the end of 2021, roughly 2x the rural share of the population in the U.S. (17.1%) and OECD (18.8%). If China’s population were as urbanized as that of the typical high-income economy...4/

its labor force would be approximately 30% larger and roughly equivalent in size to the entire OECD’s. At current trends, China’s urban population will grow by more than 215 million people by 2035, increasing the pool of available labor in these productive regions even ...5/

as the overall population dips by roughly 20 million. Just as inward migration has allowed the U.S. to avoid the deceleration implied by waning fertility rates, ongoing Chinese urbanization will largely offset the slowdown one might expect by focusing solely on demographics. 6/

There is a reason the U.S. Bureau of Labor Statistics reports nonfarm payrolls and nonfarm productivity. It is this pool of labor – rather than undifferentiated population stats – that provides the best measure of an economy’s performance and potential. 7/