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Perspective: China Rising


How the US can compete with this economic juggernaut.

But here's where the rubber meets the road: Because China's total population is 1.3 billion, 20.1% under 15 years old equals 267 million people, versus 60 million in the US. China's youthful population is therefore almost equal to the entire US population.

In 1860, the median age of the US population was 19.4 years old. With 50% of the US population under the age of 20 from 1860 through 1880, there was an unlimited supply of labor to supercharge the engine of growth. America's youthfulness led to a tremendous sense of vitality and optimism about the future, and young Americans changed the world. In a youthful society, failures are dismissed, and youthful recklessness leads to discoveries, inventions, and new ideas.

But the older a society gets, the more cautious and set in its ways it becomes. In 1860, over 50% of the US population was under 20 years old. By 2040, less than 26% of the population will be under 20 years old. With 20% of the population expected to be over 64, the passion, reckless adventurism, and vitality will be in limited supply. Just the cost to support 80 million old folks will be crushing. Developing countries with young populations will be gaining on us.

By 2050, the US demographic picture will only be slightly better than China's on a percentage basis. China, however, will benefit greatly from the shift from a rural society to an urban one. The US already has 80% of its population living in non-rural areas. By 2050, China will likely reach a similar percentage. This means that approximately 600 million people -- many of them quite young -- will move from rural areas to urban areas in the next 40 years. This figure is mind-boggling. The youthful urban population will drive progress and advancement.

The piece of the pie that's overlooked by many is the rapid education of China's youth. In 1978, there were virtually no Chinese students enrolled in postgraduate programs or studying abroad. Today, there are close to 1 million Chinese students in postgraduate programs and in excess of 100,000 students studying abroad. One-third of all the graduate students in US science and engineering programs aren't US citizens. With 267 million children under the age of 15, combined with rapid urbanization and the desire for advanced education, China is an economic juggernaut. There will be no denying it the economic crown by the middle of this century. It's inevitable.

China's ascendancy doesn't necessarily mean that the United States will fall. The UK entered the 1800s with a tremendous amount of public debt. Through economic growth, fewer military conflicts, and controlled spending, they were able to reduce their debt from 250% of GDP to 50% of GDP by 1900.

The current US economic position appears to be more dire than that of the UK in 1800. With total debt exceeding 350% of GDP, troops stationed in 120 countries, 2 ongoing wars, a national debt that will reach $14 trillion over the next 2 years, $56 trillion in unfunded future liabilities, and a rapidly aging populace, our ability for rapid economic growth is compromised. We've lived beyond our means for decades - and now we're broke.

But Americans have a lot of fight left in them. If we successfully kick our addiction to debt and spending, we can still save ourselves. If we continue on our current path of fiscal recklessness, the Chinese -- among others -- will surpass us before the middle of the century. The choice is ours.
No positions in stocks mentioned.

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