Keyu Jin: Why China Will Continue to Grow and Rise

Summary

The discussion centers on China’s economic future and its potential despite current challenges. While China faces a slowdown and demographic shifts, experts argue that the country still has room for growth due to its massive size, untapped workforce, and technological advancements. Although the economy is facing setbacks, including a real estate downturn and a lack of direct stimulus for households, there’s optimism that China can continue to converge with developed nations, driven by innovation and rising consumer spending. Furthermore, China’s younger generation, more open-minded and entrepreneurial, may shape its future, fostering greater international integration.

Takeaways

• 😀 Even if India grows 5 percentage points faster than China until 2030, China will still contribute $176 trillion more in GDP due to its sheer size.
• 😀 China's current economic slowdown is its first deep economic recession, but it’s important to consider whether this is a cyclical downturn or a permanent decline.
• 😀 Despite the slowdown, China still has massive potential for growth due to its large population, especially those earning below $300 per month, who aren't yet in the middle-income bracket.
• 😀 The service sector in China, which constitutes 80% of GDP, has room to grow significantly, especially if social protections for workers are improved.
• 😀 China’s productivity is still lagging behind developed economies like South Korea and Japan, leaving room for convergence and future growth.
• 😀 Demographic aging is often cited as a major issue, but technological adoption, especially automation and robotics, will help mitigate labor shortages and drive productivity.
• 😀 China is the world leader in industrial robot exports, and technology like AI will replace labor, especially given the country’s still-large rural population with lower-than-market wages.
• 😀 Despite a shrinking workforce, the aging population in China won’t be as detrimental as feared, thanks to the rapid spread of technology and automation.
• 😀 China’s younger generations (born in the 1980s and 1990s) are less risk-averse and more consumption-driven, with a strong inclination towards borrowing and spending on leisure, travel, and entertainment.
• 😀 The new generation in China is globally-minded, with many having studied abroad and being more open to ideas like animal rights, diversity, and social change, which could improve relations with the rest of the world.
• 😀 China’s cultural shift among younger generations means that there is a convergence between China’s Millennials and Gen Z with global trends, making them important drivers for economic and political change.

Q & A

What is the main concern about China's economic future according to Professor K. Jinn?

Professor K. Jinn expresses concern about China's current economic situation, particularly its first official economic recession. However, he also notes that China's economy has room for growth, despite challenges like the real estate downturn and the lack of stimulus support for households.

Why is China's economy still expected to contribute significantly to global GDP despite slowing growth?

Even though China’s growth is slowing, its sheer size means it will continue to contribute a significant amount to global GDP. For instance, even if India grows 5 percentage points faster than China until 2030, China will still contribute $176 trillion more in GDP than India.

How does the demographic situation in China impact its economic growth?

While some argue that China’s aging population could slow growth, Professor K. Jinn believes the issue is less critical than often assumed. He points out that technological advancements, automation, and productivity improvements can offset the negative effects of demographic aging.

What role does automation play in addressing labor force shortages in China?

Automation, particularly through industrial robots, can help replace the labor force in China. With China accounting for about 50% of industrial robot exports, automation can alleviate concerns over a shrinking labor force and improve productivity.

How does China’s undereducated rural population impact its economy?

China still has a massive undereducated rural population with wages below market rates. These workers could potentially contribute significantly to the economy if given proper training and social protections, unlocking additional consumption and service sector growth.

Why is there optimism about China’s potential despite current economic challenges?

There is optimism because of the vast gap between China’s current productivity and that of advanced economies. Despite slower growth, China still has significant room for convergence, especially in terms of its service sector and industrial development.

How does the younger generation in China differ from previous generations in terms of consumption habits?

The younger generation in China is characterized by high consumer spending and borrowing. They prioritize entertainment, leisure, and travel over saving, unlike their risk-averse, saving-focused parents. Many young people use credit to make purchases, such as borrowing money for non-essential items.

What cultural shift is occurring among China's younger generation?

China’s younger generation is more open-minded, with many having studied abroad. They are entrepreneurial, care about issues like animal rights and diversity, and generally have values that align more with global millennial and Gen Z trends than with previous Chinese generations.

How does China's younger generation contribute to its economic and political landscape?

The younger generation in China is changing the economic and potentially political landscape by embracing entrepreneurship and openness. They are driving a shift toward consumption-driven growth and connecting China more closely with global trends.

What does the generational gap in China mean for the country’s future?

The generational gap in China signifies a shift in values and economic behaviors. The younger generation is less focused on saving and more on spending and consumption, which could lead to a transformation in China’s economic model and its relationship with the global economy.