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Wednesday, May 4, 2016

There's one big problem with China's plan to transform its economy

One of China's long-term economic plans is to get its workers out of rural areas and into cities. This is part of China's larger goal of transforming the country's economy into one based on services and consumer spending. Ultimately, the government wants to get about 70% of its population into cities. But it seems as if China may actually be on the edge of a reverse migration, as many migrants are returning back home. Back in January, the National Bureau of Statistics reported that the migrant population in 2015 dropped for the first time in three decades — by 5.68 million. Bloomberg View's Adam Minter previously noted that part of that drop could be attributed to economic reasons such as a deterioration in the manufacturing sector and an improvement in rural economies. He also suggested, however, that people were moving back home for noneconomic reasons, too, such as taking care of aging parents. In a monthly research note to clients, Deutsche Bank's Torsten Sløk shared a chart showing the percentage of rural migrants seeking jobs outside their hometown over the past five years. As you can see below, the percentage has dropped close to zero, down from about 5.5% in 2010. [Screen Shot 2016 05 03 at 9.39.34 AM]Deutsche Bank One notable consequence from China's reverse migration is that China's ghost cities may end up staying ghost cities for much longer, as Seeking Alpha's Pater Tenebrarum noted. Still, while this reverse migration may not be in line with China's master plan, it's not necessarily a bad trend. As Bloomberg View's Minter noted: It should help alleviate the overcrowding in China's biggest cities and the sharp income disparity between rural and urban areas. Returning migrants tend to be more worldly and wealthy than when they left, as well as more entrepreneurial: The number of people starting new businesses in rural China grew 3.1%, year over year, in the first half of 2015. In total, about 2 million migrants have returned home to start businesses. And, arguably, the more pressing demographic issue is China's aging population; by 2050 its over-65 age group is estimated to be about equal in size to the combined total projected populations of Japan, Germany, Australia, and Egypt. NOW WATCH: FORMER GREEK FINANCE MINISTER: The single largest threat to the global economy


READ THE ORIGINAL POST AT www.businessinsider.com