Blog: Dave LeggettChina's 'demographic supertanker' will limit growth

Dave Leggett | 26 July 2011

“The Chinese auto market is likely to reach a peak of 50 million units over the next decade,” said Liu Shijin, deputy director of the Development Research Center (DRC) of the State Council. Not only that, but he said that was a cautious assessment, with 60m or 70m a possibility.

China cannot entertain 50 million automobiles a year

How high could the Chinese vehicle market go? Plenty of people have undershot the market, but let's not get too carried away on what the long-term future holds. There's a demographic trend in the pipeline resulting from the one-child policy that will have a limiting effect on China's future economic growth. This from this week's Economist: 'Between 2000 and 2010, the share of the population under 14 — future providers for their parents — slumped from 23% to 17%. China now has too few young people, not too many. It has around eight people of working age for every person over 65. By 2050 it will have only 2.2. Japan, the oldest country in the world now, has 2.6. China is getting old before it has got rich.' Labour shortages are among the forecast consequences, as will be a smaller pool of people entering prime economically productive age cohorts that come with consumption peaks and car ownership.

Don't get me wrong, China is still a boom place and will continue to be, but an official projection of up to 70m annual market sounds like it is over-egging things a tad.

India, by the way, has a lot more young people in the pipeline, suggesting that long-term economic growth (and car sales) will not be as constrained by human supply-side factors.

As the Economist notes, 'Demography is like a supertanker; it takes decades to turn around. It will pose some of China’s biggest problems.'

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