Why China’s economic boom will never be repeated

To untangle the economic complexity and challenges we face today, it helps if we can make sense of where we are and how we arrived here.

The cumulative wealth of several generations has helped the global economy boom over the past 100 years. However, this explosive growth has come to an end and will not be repeated.

The “silent generation”, born in the mid-1920s to early 1940s, fought for survival during the heavy financial insecurities of the Great Depression and second world war, emerging with a pronounced drive to be thrifty, build capital and save.

As for their children, however, after the financial crises had passed and world economies began to grow after the second world war, the new baby boomer generation benefited from their parents’ frugality by inheriting assets, access to professional education and a consciousness to at least carve out some surplus assets for a rainy day. This reality held firm for three decades, from the 1960s to the 1990s.

From the 1990s to the early 2000s, the banking industry metastasised, convincing baby boomers to dream even bigger and upgrade their living standards. This trend of upgrading was funded by borrowing against their potential earning power.

At the same time, business saw significant opportunities in China as a manufacturing economy that could produce goods for as little as 10 per cent of the domestic cost. This trend convinced the American and Western public that their stagnating income could now buy three or four times the amount of their daily and capital goods.