That some manufacturing will move to other parts of Asia makes sense (especially as Chinese labour costs rise)

But the comparison some make with Japan needs to take account of the facts that:

a) Even now only 60% of the Chinese population is urbanised (93% for Japan)

b) Output per capita must still be much lower than advanced countries so they can also catch up in that? Most developing countries have the constraint that they don't have the capital to invest for that but lack of capital is not China's constraint.

Eoin Treacy's view

Thank you for this email which raises some important points. The base effect helps to spur economic growth for frontier markets because small improvements tend to have big effects on economic potential for poor countries. Obviously, the larger a country becomes, the greater the challenge to maintain high growth rates. That’s where China is today.

China has additional idiosyncrasies worth considering. For example, the absence of a property tax means apartments remain a cheap way to park funds in a real asset. That has contributed to the fact China has more than 50 million vacant housing units. A lot of building has already taken place.

The majority of growth over the last decade has been predicated on rising debt burdens. That suggests China is under a great deal of pressure to do whatever is necessary to ensure productivity growth persists. Without it, the debt would quickly overwhelm the economy. I agree China has been an aggressive investor in growth enhancing infrastructure, but the upskilling of the workforce is more important as living standards improve.

It is reasonable to expect most countries will approach 85-90% urbanisation as food production becomes more efficient. If we consider that agriculture and lower costs are the primary rationale for rural living, the advent of vertical farms and lab-grown meat suggest the need to sustain rural communities becomes less compelling over time. Long-term, that is likely to be a priority for countries that are not food independent like China, Japan and India.