China’s three ‘grey rhinos’ – demographic crisis, debt and decoupling – are growing, threatening economic growth

But the argument is false because a rapidly ageing population is not a dividend. In fact, the demographic shift has already started to erode China’s growth momentum, and the problem will only get worse in the foreseeable future.

The second grey rhino – China’s debts, in particular local government debts – has been in view for years, and authorities have been trying to de-leverage for a long time. Although China has successfully avoided a debt crisis so far, room to muddle through this issue is shrinking fast.

It is a poorly-kept secret that it will be impossible for many local-government financing arms to repay their debts. Kunming, the capital of southwest Yunnan province, had to publicly deny a widely circulated memo stating that local financing vehicles were in trouble.

A monorail sky train runs over a street in Wuhan, central China’s Hubei province. Photo: Xinhua

In the past, China relied on its rapid economic growth to fix its debt issues. But as the economy loses its momentum, the country no longer has that luxury. With government, corporate and household debts at above 300 per cent of national gross domestic product, China may finally have to face the consequences of overborrowing.

It is also worth noting that China’s household balance sheet, which has been regarded as safe for a long time, may start to turn bad. Chinese families that borrowed heavily to buy property in the past years would suffer from debt if their incomes were reduced after lay-offs from high-paying jobs in technology and finance.

The third grey rhino, the decoupling between China and advanced economies such as the US and Japan, is a complicated process and will not happen overnight. But while China’s export power remains formidable, it also is sailing against political winds.

Call it de-risking or decoupling, but the days are over when economic integration and trade trumped value differences. China, the largest benefactor of globalisation in the earlier part of this century, has to prepare for a less accommodating international environment.