WASHINGTON (Reuters) - Economic growth in China faces mounting headwinds and could fade dramatically in the years ahead due to declining productivity and an aging population, according to a U.S. Federal Reserve study.

Trend growth could slow gradually to around 6.5 percent by 2030, or it could break much more sharply to a pace under 1 percent if forces undermining economic activity combine in a "worst-case scenario," according to the study, which was published online on Monday. Over the past decade, China's economy grew on average around 10 percent a year.

"The GDP growth rate is the sum of the growth in employment and the growth in output per employee. China faces challenges in both of these categories," wrote author Jane Haltmaier, a senior adviser in the Fed's Division of International Finance.

Buoyant Chinese growth helped support the global economy after recessions in the United States and Europe, and a significant slowdown in China could dent output, employment and corporate profits around the world.

The study concluded that some slowing was inevitable, although boosting Chinese education to get more kids through high school could provide an offset.
"Most people would probably agree that the Chinese economy cannot maintain the extremely rapid growth rates it has seen over the past three decades indefinitely. The question is thus not whether the Chinese economy will slow (but) by when and by how much," Haltmaier wrote.

Growth in China's working age population has slowed and is expected to turn negative before 2020, according to United Nations' projections. Like other nations, China is getting older. The percentage of the population aged over 60 is expected to reach nearly 25 percent by 2030, from 12 percent in 2010.

DIMINISHING RETURNS
With 80 percent of the working age population already employed, there is limited room for employment growth to contribute strongly to economic activity in the future.

As a result, the bulk of any further increase in Chinese output will have to come from greater productivity, something that faces an uphill battle.

Although China has enjoyed a productivity boom due to massive investment, that could be hard to sustain as rising living standards drive up domestic demand for consumer goods, diverting resources away from capital investment into spending.

Also, as the capital stock in the economy grows, an increasing amount of investment needs to be allocated to replacing aging plant and machinery, leaving less overall for net new investment.

In addition, slower employment growth could reduce the returns on capital, reducing the incentive to invest.

The scope for millions of more Chinese workers to move from less productive primary sectors in the economy like agriculture, to much more productive factory jobs is also likely to shrink over time.

"The share of the secondary sector is now about half of GDP, much higher than in most other countries. This suggests that further movement out of the primary sector in China is more likely to be into the tertiary sector, where the productivity dividend is lower," the study says.

In her "baseline" forecast, which showed growth slowing to just over 6 percent by 2030, Haltmaier assumed the employment-population ratio stayed at current levels, investment stayed high, workers kept moving out of primary industries, and investment shifted from primary and secondary industries into the service, or tertiary sector.

She also sketched out four alternative scenarios: slower growth in employment; lower investment; reduced incentives to invest; and a decline in the share of high-productivity manufacturing.

In all cases, Chinese output slowed by more than in the baseline forecast. But the real damage was done when all four factors began to bite together. In that worst-case scenario, growth halves to 5 percent by 2020 and declines to under 1 percent by 2030.

"Investment falls as a share of GDP and becomes less productive, employment growth is slower ... and output shifts from the manufacturing to the services sector as the economy matures," Haltmaier wrote. "It should be noted that these are all in fact very reasonable assumptions."

(Reporting by Alister Bull; Editing by Leslie Adler)

(Source: http://www.huffingtonpost.com/2013/03/27/china-economic-growth-slow-2030-fed-study_n_2962130.html?utm_hp_ref=wall-street)




Report Confirms Agriculture Sector's Continued Growth and Economic Value 

press release
March 27, 2013, 11:14 a.m. EDT  Source: MarketWatch, The Wall Street Journal


OTTAWA, ONTARIO, Mar 27, 2013 (MARKETWIRE via COMTEX) -- An Overview of the Canadian Agriculture and Agri-Food System 2013, a report released today by Agriculture and Agri-Food Canada (AAFC), shows the strong contribution of the agriculture and agri-food sector to Canada's economy. 

"Farm performance overall continues to remain strong as the industry becomes more competitive, innovative, and profitable," said Agriculture Minister Gerry Ritz. "The report shows that the agriculture and agri-food sector continues to be internationally focused, which is why our government continues to place such a strong emphasis on opening new and maintaining existing markets." 

Using historical data up to 2011, the Overview shows that the farm and food sector displayed robust performance in 2011, enjoying high farm income levels, record levels of government investment in agriculture-related research and development, strong market receipts, and strong performance of agricultural exports. 

Highlights


        
        --  The agriculture and agri-food system continues to make a significant
            contribution to Canada's gross domestic product (GDP) and employment,
            directly providing one-in-eight jobs, employing 2.1 million people, and
            accounting for 8 per cent of total GDP, or $101.1 billion.
        
        --  Shifting consumer and societal demands are influencing changes
            throughout the agriculture and agri-food system. Consumers are seeking
            more variety, more convenience, and more environmentally friendly and
            healthier food choices, as well as food that reflects consumer values
            (e.g. organic and halal products).
        
        --  Relative to other countries, Canadians enjoy some of the lowest food
            costs in the world, with spending on food and non-alcoholic beverages
            from stores accounting for just under 10 per cent of personal household
            expenditures, which is higher than in the U.S. (6.6 per cent) but lower
            than in France (13.5 per cent).
        
        --  The food and beverage processing industry is one of the top
            manufacturing industries in Canada.
        
        --  The mix of crops and livestock production is evolving, reflecting
            changes in the types of products consumers are demanding and changing
            market prices and conditions. Non-durum wheat has been overtaken by
            canola, and planted soybean area increased between 2006 and 2011.
        
        --  Federal, provincial, and territorial government spending in support of
            public research and development in agriculture and agri-food is
            important for the future productivity growth and competitiveness of the
            sector. This spending has been increasing over the past four years and
            is expected to reach $561 million for the 2011-12 fiscal year.
        





The annual Overview provides basic information about the agriculture and agri-food sector, tracks how the sector performs over time, and reflects the challenges and changes that have occurred in recent years. It reviews in detail the whole value chain, covering not only primary agriculture and input suppliers but also food and beverage processing, food distribution, consumer trends, and government investment. 

AAFC also recently released the Farm Income Forecast and the Medium Term Outlook. Together, these three reports provide a comprehensive historical profile of the sector, as well as a financial and market outlook for producers, industry and stakeholders, and governments as they plan for the years ahead.
For more information, please visit the Economic and Market Information (www.agr.gc.ca/economicreports) web page.

        Contacts:
        Media Relations
        Agriculture and Agri-Food Canada
        Ottawa, Ontario
        613-773-7972
        1-866-345-7972
        
        Jeff English
        Press Secretary
        Office of the Honourable Gerry Ritz
        613-773-1059
        
SOURCE: Agriculture and Agri-Food Canada
(Source:  http://www.marketwatch.com/story/report-confirms-agriculture-sectors-continued-growth-and-economic-value-2013-03-27)


Economic growth not producing jobs

 
"While it is good to see there was growth in the economy in the last three months of 2012, we have to ask: where are the jobs?" says Bill Rosenberg, CTU Economist.

"Growth is still patchy, and one quarter of strong 1.5 percent growth does not make a booming economy, but at the same time we have 6.9 percent unemployment, 163,000 people unemployed and 284,000 jobless with many people discouraged from finding work and 111,000 wanting more work."

"The growth in the economy also implies increasing labour productivity, which should lead to higher wages if wage bargaining was working properly, but we are seeing very low wage growth", Rosenberg added. "Many working people are not seeing the growth in GDP flowing through into their pockets in jobs or incomes."

"Worries about manufacturing will continue after these results. While most of the economy showed growth in the three months to December, manufacturing was the exception with a fall of 0.5 percent in the quarter, though it rose 1.3 percent for the year. However this was dependent on the continuing rise in food, beverage and tobacco manufacturing. Other manufacturing fell approximately 1.4 percent in the quarter and also fell over the whole year. The economy is becoming more dependent on agriculture rather than diversifying."

"This reinforces the need for the need for more active government involvement to ensure good jobs are created. It is not just happening by itself, and the government needs to do more," said Rosenberg.

(Source: http://nz.finance.yahoo.com/news/economic-growth-not-producing-jobs-232010626.html)