Ever since the late ‘70s, China has been known as a low-cost, high-growth phenomenon. Its economic transformation began 30 years ago, as it emerged as a low-cost manufacturing center. More recently, companies such as Internet equipment maker Huawei have been competing with multinationals at higher levels, as China looks to develop the intellectual capital of a developed nation.
And with the economy growing at 9 percent, even in the aftermath of the financial crisis, a middle class and consumer culture is taking shape. While China has not crossed the threshold from emerging to developed economy, it is getting there very fast.
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China’s $6 trillion economy is not without its challenges, though. Over the last year, it has grappled with higher inflation and what many experts believe is a real estate bubble in some markets. And despite the relative prosperity of many urban regions, the country as a whole still has a low per-capita income. The most fundamental and important hurdle may be demographic, though.
Thanks to a slowing birthrate, mandated decades ago, by China’s one-child-per-family policy, China’s population is rapidly aging. While other countries, notably Japan, are struggling with whether they will have enough workers to support the older generations, the problem is magnified by China’s population of 1.3 billion, the largest in the world. And since China is a key source of demand for countless markets and industries around the world, it’s ability to solve the problem in satisfactory way is key to global growth. ....