John Foley is a columnist with Reuters Breakingviews. The opinion expressed here is his own.
For China, July could be called “the month of five symbols.” Demographic, financial and monetary milestones give insight into the future of the world’s third-biggest economy.
With them in mind, investors might want to think five times about how they proceed.
1. The population got older.
China is aging at its fastest rate ever, state media said in July, based on new data from 2009. Almost a fifth of the population will be “aged” by 2050, defined as over 65, compared with less than a twentieth in 1950, says the Asian Development Bank.
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That matters because it means the working-age population will shrink. It should also drain savings as the elderly tap their nest eggs.
This would be a major reversal. China still has a young and high-saving population. Despite some signs of wage pressure in a few cities, there is still a significant supply of underemployed excess labour around the country.
But the risk is that an early, man-made population shift might make it hard to keep up its 10-percent GDP growth clip for the next few decades.
2. Henan province got bigger .
The population of China’s biggest province passed 100 million in July, according to official estimates. A formal census is due later this year. Henan, 20 percent poorer on a GDP per capita basis than the country as a whole, has more people than Germany, France or the United Kingdom. Without China’s one-child policy, this landmark would have arrived 13 years ago.
3. China’s export engine revved up again.
Falling exports led China into trouble in 2008 and now rising exports may do the same. Exports returned to pre-crisis levels, Beijing confirmed in July, with year-on-year growth of more than 40 percent.
Policymakers are trying to dampen domestic demand to prevent inflationary overdrive.
That may reopen wounds that appeared cauterized after the United States decided against labelling China a “currency manipulator,” a name that can lead to trade sanctions.
4. China’s energy needs exploded.
China surpassed the U.S. as the world’s biggest consumer of energy in 2009, according to the International Energy Agency, using the equivalent of 2.3 billion tons of oil.
The Middle Kingdom disputed the timing, but not the inevitability, of the title. It was already the world’s biggest importer of resources.
The implications are nightmarish. China uses a quarter of the energy the U.S. does per capita. Does that mean its world-beating emissions could be four times what they are today? Probably not.
China is investing heavily in clean technology, for example. But such statistics should help talk up prices of energy-related commodities and assets for some time to come.
5. Banks broke yet another record. Agricultural Bank of China pulled
off a $19 billion initial public offering in Shanghai and Hong Kong, which, if its over allotment option is exercised, will be the world’s biggest at $22 billion.
That helped China beat another record: it hosted all of the world’s three largest IPO markets by value this year to date, showing the centre of gravity for new stocks has shifted decisively east.
AgBank and its underwriters doggedly pursued the title of “world’s biggest.” In China, big numbers really matter.
Indeed, of all numbers, the most mystically powerful in Beijing may be one.
China wants to be the world leader in almost everything. One day that too will probably come to pass.
