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China Faces Diminishing Labor Supply and Economic Implications

China is experiencing a significant decrease in labor supply, primarily due to the long-standing one-child policy. As the population shrinks, the labor force contracts, leading to an increase in real wage rates. This situation compels Chinese companies to innovate and upgrade to higher-quality, technologically advanced products. History shows that Japan faced a similar transformation in the 1960s and 70s, ultimately boosting its economy. Now may be a prime opportunity to invest in Chinese technological and machinery industries as they adapt to these changes.

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China Faces Diminishing Labor Supply and Economic Implications

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  1. ECON 2105 C China’s Labor Supply

  2. China Faces Dwindling Labor Supply By Bloomberg News - Aug 30, 2011

  3. China Faces Dwindling Labor Supply • China’s 30yr old one-child policy has caused a decrease in population • A decrease in labor force has caused the real wage rate to increase • Chinese companies are forced to upgrade to higher quality / technological products / higher value products • Japan had to do the same thing in the 1960’s and 70’s and look where they are now • It might be a good time to invest in Chinese technological and machine industry companies

  4. China’s Labor Supply RWR LS2 LS1 LD LABOR • CURVE SHIFT: • $ LS = $population

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