From the point of view of population factors, this paper discusses the future economic growth prospects of China.
Recently, China has received a lot of criticism. Many economists have said that China's economy needs to be rebalanced, that there is too much investment, too little consumption, too much pollution, that structural risks may lead to crises, and so on. But I find that these criticisms, especially those from the West, are unfair. The reason why it is unfair is because they compare China's today with that of the Western economy today. In fact, Japan and the West should compare Japan and the West at the same stage of economic development as China's economic development. If we compare this, we can see that China is doing very well. For example, compared with the Western economy 100 years ago and the Japanese economy 50 years ago, China is doing very well.
I made a picture of the Chinese economy in the simplest way, showing the relationship between workers' wages and capital gains. In the process of industrialization, a lot of rural surplus labor force will enter the city one after another, because the labor supply is relatively surplus in the early stage of industrialization, so the low labor price can remain stable for a long time. 5-7 years ago, China's labor market was like this. During that period, a lot of rural labor people poured into the city.
Until the turning point of labor supply and demand is reached, the price of labor is always low, and the capitalist will increase his investment continuously to obtain profits. At this time, the share of capital return and wage distribution is linear, the capitalist keeps making more money, and the supply line of labor is basically flat. If you look at income inequality as the economy grows, because the wages of the workers are not doing so well, the capitalists are making more and more money as the labor force grows. Make a lot of money, as long as the capitalists will continue to invest in, the demand of labor force have moved to the right, as the demand for Labour increases, almost all rural surplus population to enter factory work, got to lewis turning point, the supply of labor began to nervous, workers' bargaining power increase, because of the rural surplus population is running out, so that workers would demand higher wages, by this time the capitalists will promise to raise for capitalists will still make money, once they have arrived at this point, the economy has been normalized. This is how Japan and the West developed, and after the Lewis turning point, civil rights, animal rights, women's rights, and so on, could all be brought up for negotiation.
Once this turning point occurs, the country faces three challenges: (1) one is the political challenge Once the workers have the confidence to know that they have the right to negotiate, they will form trade unions and ask for this and that, there will be a lot of strikes and labor disputes will emerge one after another. I remember when I was a child in Japan, people went on strike almost every day, and some strikes even escalated into fights, protests in front of Congress, and so on. It took Japan almost 15 to 20 years to gradually stabilize.
What do you mean, calm down? When workers keep demanding higher wages, they don't know what capitalists expect, and capitalists used to be very honest employees. In the face of changing workers, they argue back and forth with these workers until workers realize what they should expect from capitalists, capitalists realize what they should expect from workers, after 15 years of fighting and protest, and so on. Japan's employers and employees have achieved a good political order, once the number of people entering the city has decreased, indicating that Japan has exceeded the Louis turning point, when wages have slowly increased, and the line of labor disputes has slowly stabilized. The same is true in South Korea. As South Korea has moved from autocratic politics to democratic politics, the changes in South Korea have been even more intense, as we can see from the picture. And when the population of the metropolis becomes stable, then the whole situation is gradually stable.
I don't know how China will go through this process, because it will be very volatile and put a lot of pressure on the whole social system. On the one hand, the Chinese government wants these things not to happen, but on the other hand, if the Chinese government curbs labor disputes at the moment, it will at the same time put more pressure on the future, because one day it will erupt, and because repression may erupt even more, this is the situation facing the Chinese government. In my opinion, capitalists should work with the Chinese government to ensure that the requirements of workers are gradually met, as has been the case in other countries.
(II) the second challenge is the economic challenge With the rising wages of workers, the competitiveness of companies has declined, especially when the profits of these companies are due to the low price of labor in China. The middle-income trap has been mentioned. I think the "middle-income trap" is a global phenomenon. Without globalization, we do not have to worry about the middle-income trap; but once the economy is globalized, the middle-income trap will be more intractable. For example, one of the important reasons for China's economic miracle in previous years is globalization, but as wages rise, globalization has become a negative impact, such as the relocation of many factories to other developing countries with lower costs. In order to tide over the middle-income trap crisis, the government, the labor side and the management all have to make a lot of efforts.
(III) the third challenge is the composition of the population According to the Bureau of Statistics, China's working-age population has begun to decline in 2012, and the decline in the working-age population means that the labor supply curve has stopped tilting from the top left to the bottom right to the top left from the bottom left, and the labor supply will continue to decline even if wages are forced to rise. By then, foreign companies that once poured in because of China's flood of cheap labour, such as Myanmar and Bangladesh, will begin to migrate to lower-wage countries, such as Myanmar and Bangladesh. This will lead to China falling into the middle-income trap before the industrial upgrading has been completed.
Therefore, the 15 years from 2015 to 2030 are very important to China. Why are these 15 years important? If China's economy wants to continue to develop and cross the middle-income trap, what else will it do? All economists are discussing this topic, and the measures given include structural reform, market-oriented reform, perfecting the rule of law in the country, and so on. If these reforms are carried out, even if China develops at a rate of 2.5%, then China's per capita GDP will reach 30, 000 in 15 years' time, in which case the Chinese will be able to enjoy a rich retirement life. And if it fails to do so over the next 15 years, China may be trapped in the middle-income trap.
At present, Chinese society is on the verge of a structural change. This structural change is more profound than the long-term and painful economic rebalancing plan that the Chinese government is currently eager to pursue. It is necessary to learn from Malaysia's model in order to prevent rising wages from "driving out" these multinationals.
On the whole, China still has millions of young people who have dreams, are willing to bear hardships and love to learn. I think as long as the Chinese authorities can establish a sound system and formulate the right direction of development, they will certainly be able to buy time for reform and reproduce the Chinese miracle. In the process, I would like to remind that with the strength of China in recent years, the territorial disputes between China and its neighbours have escalated day by day, which has a negative impact on foreign enterprises investing in China. After all, in addition to labor costs, the business environment, workers' skills and local market demand are also important factors to attract foreign investment. Therefore, I hope that China can be friends with all countries according to the path originally designed by Deng Xiaoping. Adhere to the principle of free trade, focus on economic development, in a limited period of time to successfully cross the middle-income trap.