Is the 21st century really Chinese?

It is not unusual to hear people saying that the 19th century was British Empire’s century, the 20th was the United States’, and the 21st will be China’s.

But once when you think about it, you cannot help but to be sceptical.

I think the fast growth of China can be at least partly attributed by the fact that it was not quite developed. As a result, productivity was in a very low level initially when China “opened” its economy in late 1970s. Importing Western technology helped to increase the productivity quickly. Developing a technology from scratch and importing a technology are totally different, as developing a technology involves quite a bit a random factors, while importing technology is fairly easy as long as you have money.

Even though China and Japan has roughly the same total output now, but China population is 10 times of Japan, so overall China is only one tenth as rich as Japan on a per capita basis. But there is some striking similarity of China and Japan.

China

Japan

Source: US Census Bureau International Data Base

If all the bars in the China population pyramid in 2010 is moved up for 15 years, probably it will look like that one of Japan now. Indeed, the One-child Policy would limit the growth of young population, so in 15 years, we may actually see quite a major ageing problem in China.

And let us look at India:

Source: US Census Bureau International Data Base

The population pyramid is pretty self-explanatory. India has a growing population. They are young, and we know they are educated.

In terms of population growth, China actually has a even lower growth rate than the United States.

Population growth year-on-year

Source: US Census Bureau International Data Base

The implication here is that if the demographic trend continues, in 15-20 years China will face a serious ageing problem. If the population growth continues to slow, going forward there will be actually less people working as more and more people aged. As one of my Mainland Chinese analyst friend put it: China is only a tenth as rich as Japan, but it would probably get as aged as Japan before it could get as rich as Japan.

If working population do not grow, the only way for the economy to growth, all else being equal, is increase in productivity by technological advances. It is perhaps still good enough for China to play a catch-up in technological front, but 10 or 20 years later, if China gets as technologically advanced as the United States, both countries have to innovate to increase increase productivity. Well, we know China is good at, put it bluntly, copying others’ technology and produce something which would be sold at one tenth of the price in, say, United States (think about fake iphone). When it comes to innovation on their own, perhaps we have not seen much talents on that front.

If things do not change now, I would rather go more bullish on India in long term. And returning to the statement at the beginning. Yes, the 19th century was British, the 20th was American. The 21st? Perhaps not quite Chinese.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.