China Is Dying

Silicon Valley is past its peak. That's the bellwether region for US economic convergence. The bellwether for global economic convergence is China. That country is past its peak:

More evidence of a shift in foreign direct investment away from China to other emerging Asian economies, headed by Indonesia, Vietnam, the Philippines and India.

HSBC says in a report that south east Asia’s share of global FDI inflows, which slumped from 8 per cent to 2 per cent after the 1998 Asian financial crisis, is back to 7.6 per cent – almost equal to China’s 8.1 per cent. With their young populations, these countries and India should see further FDI increases from companies looking to capitalise on low-cost labour, while Chinese inflows will slow as its population ages and its economy matures.

Author and HSBC economist Trinh Nguyen says that as well as the economic change in China, three global trends will drive FDI increases in the rest of Asia: cheap money in the advanced world, the renminbi’s appreciation, and economic stagnation in the developed economies.

Emphasis added. Inflows are slowing. The population is getting older. The economy is maturing. The action is diffusing to other upstart countries. Convergence.

Now the fun begins. Can China adjust? Economic activity is migrating away from legacy cost-burdened eastern coast inland to cheaper labor. Convergence is happening within the country, as well. For now, there appears to be enough frontier to keep things humming along.