China to suffer labor shortage woes

China's rural surplus labor dipped to just 0.4% or 6 million of the total population, a study reveals.

Iin a release by Barclays, a study by David Li and Sean Xu showed that China is already beyond the Lewis turning point, ie, the country now faces labour shortage problems. According to their estimates, the amount of rural surplus labour was equivalent to about 11.5% of the total population in 2004.

Here's more from Barclays:

In 2012, it had fallen to just 0.4% of the total population, or just 6mn across the entire country. This, according to Li & Xu, has been the key factor driving rapid labour income growth in recent years in China.

Li & Xu also conducted some statistical analyses, applying a provincial panel data set, to gauge the most important determinants of consumption. Their general findings are that urbanisation, the dependency ratio and pension coverage all play a part in driving household consumption growth in China, but that the share of labour income in GDP is by far the most important determinant.

Li & Xu’s estimates of household consumption’s share of GDP are similar to the official data before 2007, but then point to a steady recovery, from 36.0% in 2007 to 38.5% in 2011Indeed, visually, they find a very close correlation between the household consumption and labour income shares of GDP.