Michael Pettis

2/9 The real medium- and long-term challenge for China lies in the way it rebalances the domestic distribution of income. If it can raise household income fast enough and in a non-disruptive way, a declining working population is still consistent with...

3/9 rising living standards, even if that means (as it most likely does) a slowdown in the GDP growth rate. If it cannot , a declining working population will be the least of its problems.

4/9 For me the real demographic problem China faces is not the decline in its working population but rather the unevenness of that decline. That's because the working population will continue to rise at a healthy pace in the faster-growing, richer, eastern parts of China.

5/9 The rest of China, however, with its low income levels, weak growth, and unmanageable debt burdens, will absorb more than 100% of the decline in China's working population. What is worse, it will be their best-educated and most entrepreneurial young people who will migrate.

6/9 With this area already comprising a disproportionate share of non-productive investment in property and infrastructure, a declining working population means that the economic value of this investment will fall even faster, worsening the debt burden.

7/9 If this forces the poorer parts to cut back on educational spending and social services, it can further entrench the disparities. The question is how Beijing will respond to these rising differences.

8/9 It would have to choose between diverting resources to richer China, which would be better for the economy, or to poor China, which will be better for social and political stability. I am not sure how Beijing will respond, but I tell my clients that we should...

9/9 increasingly consider not just how the Chinese economy will choose, or be forced, to adjust, but perhaps even more importantly, how unevenly this adjustment, including the demographic adjustment, will be distributed throughout the economy.