For nearly two decades, we've counted on China to be the perpetual growth machine that would power the world's economy.But as many have observed, that era is slowly coming to an end.
Jefferies recently published a massive 426-page report that boils down what we can expect in this next phase of China's development.
Here's a portion of the bank's summary of its presentation, called Jefferies "China 2025: A Clear Path to Prosperity":
Academics have already pointed out that China has hit ‘a Lewis turning point’ (China has run out of cheap labor) and/or growth will eventually slow since the economy has ‘less catch-up left’ as technological limits are appearing (Solow Growth Model).
Equally, China will need to begin developing its own technology rather than importing innovation. This can be costly and far more difficult to achieve success. It is very difficult for a country to invest over 50% of its GDP productively... [And] demographics will begin to work against the economy as the 15 to 24 cohort falls by 20% over the same period.
Jefferies asked its top China analysts to come up with "megatrends" that will define the Middle Kingdom.
They came up with seven: urbanization, consumerization, slowing trade, slowing
fixed asset investment, financial reform, information mobility and service sector development.
We have summarized their projections here.
-Megatrend 1: China is entering a new demographic phase.-
Source: Jefferies China 2025: A Clear Path to Prosperity
-DEMOGRAPHICS: Its "demographic dividend" will end as its working-age population falls.-
Source: Jefferies China 2025: A Clear Path to Prosperity
-DEMOGRAPHICS: As a result, China will end its one-child policy.-
Source: Jefferies China 2025: A Clear Path to Prosperity
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