China is in a race between its slowing down economic growth and accelerating population aging. Based on macro data from national accounts and micro data from national household surveys, this research applies the National Transfer Account framework to examine recent changes in income and consumption at both the aggregate and individual levels and project the effect of population aging on economic profiles.
The findings show that recent rapid economic growth has resulted in a sizable lifecycle surplus, with labor income far exceeding consumption. With expected increases in consumption, as shown in the historical experience of Taiwan, and with accelerating population aging, however, this surplus is expected to be erased before 2035. China’s three-decade long economic boom has led to an age of abundance, but that era will most likely to end in front of the eyes of the current young generation.
Mao Zedong did not see the value of reform and opening up. The China part of Nixon’s 1967 Foreign Affairs article suggested an implicit bargain that provided the conceptual basis for China’s new direction after 1978. That bargain was if China focused on domestic development and didn’t threaten the security of its neighbours, the United States would help.
Sentiment inside the Beltway has turned sharply against China. There are many issues where the two parties sound more or less the same. Trump and others in the administration seem heavily invested in a ‘get very tough with China’ stance. It’s possible that some Democrats might argue that a decoupling strategy borders on lunacy. But if Trump believes this will play well with his core constituencies as his reelection campaign moves into high gear, he will probably decide to stick with it, if the costs and the collateral damage seem manageable. But that’s a very big if, especially if the downsides of a protracted trade war for both American consumers and for American firms become increasingly apparent.