There are increasing signals that China's economy is really entering "gradual decline" phase of capital intensity. While there will naturally be up/down volatility, we are starting to see major YoY declines in KPIs tied to capital-intensive activities. https://x.com/laurimyllyvirta/...
This is my long-term model/framework on the evolution of capital-intensity of China's economy. China is moving from "plateau" phase to the "decline" phase. https://x.com/GlennLuk/status/...
In the GDP calculation under the expenditures approach (GDP = C + I + NX, "expenditures" (a.k.a. "Consumption") is co- or inter-dependent with "gross capital formation" (a.k.a. "Investment"), with only the small component of "Net eXports" as the other variable. IOW changes in
I put "consumption" in quotes because all economic activity captures in GDP eventually turns into (conceptual) consumption. "Investment" is merely capitalized consumption and the difference between C and I is merely accounting in nature. That is why it's less confusing to use
I attempted to explain the common conflation between the layman's conception of "consumption" and the GDP accounting-based definition of "consumption" in this piece from last year: https://www.readwriteinvest.co...
These long-term trends become even easier to understand for laypeople if we venture outside the very abstract world of macroeconomics into the real world — and think in terms of the key production unit in the modern economy: the worker.
China's economy has been undergoing continuous waves of structural reform for decades. Structural reforms often focus on the allocation of the workforce into various activities and sectors. Some activities and sectors are more capital-intensive than others. And there is a
I posit that the key workforce factor is education level. Workers that have only up to a secondary school education generally have skills/experience that fit "blue collar" work. Workers that have post-secondary education are generally a better fit for "white collar" work.
This is why I strongly believe that at the macro level, examining the evolution of China's workforce (from blue- ➡️ white-collar) is such an important variable to consider in predicting the capital-intensity of the economy. https://x.com/GlennLuk/status/...
This transition is driven by key underlying changes on both the supply and demand sides: (i) changes in the types of activities undertaken by white- vs. blue-collar workforces: more R&D, more automation, more services, less construction, less labor-intensive. (ii) changes in