China's labour Problem In 2 Charts

Lately, we’ve been getting a lot of budding economic green shoots from China.  According to China’s official and HSBC manufacturing PMI reports, growth is reaccelerating.

This is a great sign for global demand as China is the world’s second largest economy.

However, China’s laborforce is less and less able to meet the demands of its growth. The working age population is shrinking and hourly labour costs are rising.

“China in particular seems to have hit a ‘Lewis Turning Point’, which is the point at which the excess low cost labour force is exhausted, leading to increased wage inflation,” writes Credit Suisse’s Andrew Garthwaite. “The 19- 24 year old age group is peaking this year, with the broader labour force estimated to peak in 2015. A rise in social security related costs is also likely to happen over time (the costs falling probably on the employer) again raising the relative cost of labour.”

Here are the two charts that say it all:

china labour

Photo: Credit Suisse

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