Hey, everybody, Peter Zion here coming to you from Marshalltown, Iowa, my mom was a little upset that the videos I did earlier did not have a flower garden in the background.

Your topic today is Chinese demographics, we’ve gotten some new data out of the Chinese that has made the way to the UN. And so the updates have allowed us to update our assessment, and oh, my God, it’s bad. 

Okay, so let’s start with this first graphic to show you where the official data had us as of a year or two years ago: this narrowing for the bottom seven age blocks is the fastest aging workforce in the world, and arguably the fastest one in human history. 

This indicates that the number of new workers coming in is so small compared to the number that are retiring, that you’re having massive increase in labor costs, and from adjacent numbers that we do trust. I mean, Chinese data is always a little touch and go. But from the numbers that we do have that we do trust, which is labor costs, Chinese labor is increasing at the fastest pace of any country in any era at any time in history, including during the Black Death itself. 

Since 2000, the cost of Chinese labor has gone up by about a factor of 15. While the size of the Chinese economy has only expanded by a factor of about roughly 3.5, to four. So really, really bad. The Chinese are only an industrial power today under this data, because of the sunk cost of the industrial plant that it took to build everything that’s there in the first place.

Now, that’s not nothing that is huge. That’s, you know, trillions of dollars 10s of trillions of dollars, and it’s highly relevant. But most industries in most sub sectors that have decided to relocate to other countries have discovered that they’ve got shorter, simpler supply chains with a lot less of a political headache. 

Okay, here is the new data. And as you can see that the number of children who are under age five has just collapsed, and there are now roughly twice as many that are age 15, as there are age five. What happened back in 2017? Well before COVID Is that we had a sudden collapse in the birth rate roughly 40% over the next five years, among the Chinese, the ethnic Han population and more than 50%, among a lot of the minorities. 

And that is before COVID, which saw anecdotally the birth rate drops considerably more and before COVID, which probably raised the death rate considerably. We’re never going to get good data on death rate, or at least not anytime soon. Because the Chinese when they did the reopening, they just stopped collecting the data on deaths and COVID. And everything because they didn’t want the world to know how many Chinese died. So they don’t know.

With this data, this snapshot in time, this is official state data, it’s still probably not wildly accurate. We still have the Shanghai Academy of Sciences, which is like the biggest nerd group you’ve got in the country, saying that the country has over counted their population under age 45 by over 100 million people in the aftermath of the one child policy. And so really, what we need to consider is that that official data and at the very bottom, you need to play that up. And this last graphic kind of shows you our internal estimate of where that is. 

Now, this is not official, those yellow bars probably don’t exist. But that is not what the official data is saying. This is an extrapolation from what the Shanghai Academy of Sciences is saying. Anyway, some version of this is probably the truth, which means that China aged past the point of demographic no return over 20 years ago. And it wasn’t just this year that India became the world’s most populous country, that probably happened roughly a decade ago. And it wasn’t in 2018, that the average Chinese aged past the average American that was probably roughly in 2007, or 2008. 

So this is not a country that is in demographic decay. This is a country that is in the advanced stages of demographic collapse. And this is going to be the final decade that China can exist as a modern industrialized nation state because it simply isn’t going to have the people to even try. So for those of you who have business in China, you’re becoming more and more aware of the political system, you’re becoming aware that it’s becoming illegal for foreigners to even access data, data that in most countries is publicly available. 

You now have on top of that, to figure out that not only is the labor force never recovered and the labor costs you’re having now are as low as they’re ever going to be. Consumption is as high as it’s ever going to be. So even before you consider the political complications, or issues with the operating environment, or energy axis, or geopolitical risks or reputational risks, the numbers just aren’t there anymore. So you have to ask yourself while you’re still there. Sunk cost of industrial plant? That’s a reasonable answer. But it becomes less relevant with every passing year is everything else catches up all right you guys take care