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All this has important implications both for nominal growth rates and per capita growth rates in the next few decades.  For one thing, a country’s GDP growth rate can be expressed as a factor of the growth rate of its working population and the growth rate of average productivity per worker.  As the growth rate of the working population swings from positive to negative – by a little more than 2%, depending on what periods you compare – this will have a commensurate impact on Chinese GDP growth rates, i.e. all other things being equal (which of course they are not).  China’s equilibrium growth rate should be about 2% lower than the equilibrium growth rate of the past two or three decades.

 This implies that over the last three decades China has had a demographic bias towards trade surpluses (working population, a proxy for production, grew faster than total population, a proxy for consumption), but over the next three decades it is likely to have a demographic bias towards trade deficits.  

Three years ago I argued in a Wall Street Journal OpEd piece that because of the aging and declining populations of Europe and Japan (and to a lesser extent China and Russia), compared to the growing population and relatively stable age distribution in the US, it was not unreasonable for the former countries to run large current account surpluses with the US since they would need the accumulated claims against the US to pay for the current account deficits they would need to run to manage their demographic adjustments.  This is why I have never been terribly worried about the sustainability of the US trade deficit.  In the next decade it is likely that demographic changes will create pressures to reverse those US trade deficits.