Charles Goodhart and Manoj Pradhan in the LSE Business Review:
The rise of China to the status of economic superpower has been the dominant narrative of the last three decades. China’s rise as the main feature of globalisation, in conjunction with a beneficial sweet spot in demography, drove output up and inflation down in the advanced economies. But these trends are now reversing. China’s economic success depended on many factors, a strong historical social and cultural background, political single-mindedness, a flexible and competent labour force, fed by internal migration, capital controls, developing satisfactory infrastructure and absorption of Western technological know-how. But China’s greatest contribution to global growth is now past. Its working age population is now shrinking, while the ranks of the old expands.
This great demographic reversal will lead to a return of inflation, higher nominal interest rates, lessening inequality and higher productivity, but worsening fiscal problems, as medical, care and pension expenditures all increase in our ageing societies. Below are key points in our new book. the executive summaries of some of its chapters.