Change in China and What it Means for Investors

August 12th Weekly Market Update

Last week’s economic reports from China for July added fuel to the fiery debate over whether China’s economy is slowing rapidly, possibly forming a sharp “hard landing,” or slowing more gradually and likely forming a more shallow dip or “soft landing,” which could already be stabilizing. This debate focuses primarily on the pace of the decline and all sides assume an eventual rebound. However, the debate misses the point: whatever the landing, there may not be a rebound.

One of the key reasons growth in the world’s second-largest economy is irrevocably slowing from the 10% per year pace of the past 30 years made headlines last week: China’s policymakers are studying changes to the controversial “one-child” policy. Possible reform will involve new exemptions to the one-child rule intended to redraw China’s demographic profile. Change is needed. China’s working-age population, defined as those between ages 15 and 64, is at a critical turning point.

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