The Problem With China

China has a population problem.

Not the one that everyone has talked about for decades. For decades China has had a “one child” policy that limited its population growth. The conventional wisdom was that they needed to control this; too many people slicing up the resource pie means that each person gets an ever smaller slice. It was this logic that led Thomas Malthus to predict population growth would eventually outstrip the food supply of a country, leading to widespread famine. Such was the “dismal science” of economics!

But he saw people only as consumers. They’re producers as well. And as billions of individuals enter the middle class and avail themselves of modern amenities, the world’s productivity will skyrocket. New ideas are far more important than capital or labor. We’re richer than we used to be because we know more than we used to know. And ideas are not conserved. A new concept can be adopted cheaply by billions.

Since China is limiting its population growth, it will have fewer new ideas to help its people adapt. It will have less art and literature to make sense of modern paradoxes. It will have fewer innovators who might help reconcile the wisdom of traditional medicine with the analytical rigor of scientific healthcare.

In a free society, increased demand would increase supply. If there aren’t enough authors or artists, we import the literature or encourage immigration. But China is a command economy, with restrictive import and immigration policies. Hmm.

China’s population problem is of its own making. But where there’s a will, there’s a way. Eventually they’ll figure out how to grow their human resources, too.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2017-07-17T12:35:05+00:00 May 2nd, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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