Saturday, 12 November 2011

China new loans jump but working age population to shrink

Friday brought signs that China may be easing credit restrictions. The People's Bank of China reported that new loans issued by banks rose almost 25 per cent in October to 586.8 billion yuan from 470 billion yuan in September.

China is obviously concerned about the fallout from the European debt crisis. However, China has to be careful about raising debt levels in an economy where the working age population will soon start to decline. Mamta Badkar at Business Insider draws on a Nomura report to highlight these as well as other demographic statistics:

  • China's population will peak in 2025.
  • Its working age population will rise from 971 million in 2010 to 996 million in 2015 but then shrink to 960 million in 2030.
  • Its old age dependency ratio will surge from 11.3 percent in 2010 to 23.9 percent in 2030.

Already, there are signs that China's factories are being hit by higher wages even as demand from Europe and the US slows.

This may be a sign that China's deflationary impact on the rest of the world is coming to an end.

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