https://www.alainguillot.com/china/

Admiring China’s Economic Growth

For the past 10 years, I admired China’s rapid economic growth with great interest. I was convinced it would be a formidable challenger to the economic superiority of the U.S. However, over the past 12 months, I have changed my mind.

If you follow economic news, you might be impressed by China’s great advancements in artificial intelligence, military expansion, and global resource acquisition. China has also become a major economic partner in regions like Africa, Latin America, and Southeast Asia.

Also China’s military, which once was seen as inferior, is now rapidly catching up with that of the U.S. From the outside, many would feel confident predicting that China will soon catch up with the U.S. economically, politically, and culturally.

However, a closer look reveals significant weaknesses.

China is facing a major demographic crisis. The fertility rate needed to maintain a stable population is about 2.1 children per woman. China’s fertility rate is currently 1.1. The reason is simple: women no longer want to have children. There is insufficient infrastructure to support family growth, and as a result, families are simply not growing.

Without a younger generation to take over, the consequences are dire. An aging population is less productive, has higher healthcare costs, and they will start collecting pensions at the age of 55 for women and age 63 for men. There won’t be enough workers to fund these pensions or sustain the economy.

The U.S. is also experiencing a birth rate decline, with a rate of 1.7 children per woman. However, the U.S. can address this challenge because millions of people want to migrate to the U.S. The U.S. has a serious immigration influx, with people risking their lives to get there, while no one is risking their lives to migrate to China. In fact, many Chinese citizens aspire to move to the U.S.

For investors, this information is crucial. You don’t want to invest your money in China without being aware of these risks. While investing in China might seem attractive in the short term, from a long-term perspective, China is far less appealing.

My tip for you: keep investing in the U.S. It offers a liquid market, is full of creative people, and, for now, maintains a growing population.