zerohedge.com / By Tyler Durden / January 29, 2013, 19:11
The meme of the moment remains China’s ‘rotation’ to urbanization as the new growth engine, but as SocGen’s Wei Yao notes, while this shift from farmers to manufacturers has raised productivity, urban population growth is set to decelerate rapidly in the current decade. Yao comments that the impact of urbanization has been “misunderstood and overstated by the market” as it is now official that China’s working-age population has peaked and is starting to decline. China’s National Bureau Statistics announced that the share of population aged between 15 and 60 years old declined for the first time in 2012 by 0.6ppt to 69.2%. This slower labor growth brings China ever closer to the so-called “Lewis Turning Point” at which excess labor in the agriculture sector is fully absorbed into modern sectors – leading to no or negligible productivity improvements. The bottom line is that hopes for “new urbanization” appear overdone, given the demographic (and productivity) headwinds and China’s focus should shift to social safety nets and not torrid physical construction.