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How big a role will China’s demographics play in its economic prospects? Inevitably, a big one. In fact, this must be one of the most important factors determining China’s economic prospects. Even though per capita output still has great potential to rise, because China is a relatively poor country, the decline in population and labor force will slow down economic growth. So, what does this mean for its future?
Start with the basics. United Nations data shows that the average number of children per woman in China has plummeted from an average of 6 in the 1950s and 1960s to an average of 1.7 in the 2000s and 2010s. So far in the 2020s, that number has dropped to 1.2, slightly lower than Japan but higher than South Korea.
One plausible explanation is that urbanization leads to a sharp decline in the desire for children, especially among educated women.China’s now-abandoned one-child policy accelerated the shift toward low fertility and created a huge problem of gender imbalance: According to U.S. Census Bureau data show that the ratio of boys born to girls peaked at 118:100 in 2005. But fertility decline will eventually happen anyway. Even China’s powerful state cannot force people to have children they don’t want. (See chart.)
As a result, China’s population is undergoing multiple transformations. According to (relatively conservative) United Nations mid-term forecasts, China’s population will decrease from 1.425 billion in 2020 to 1.313 billion in 2050. China’s proportion of the world’s population will also drop from 22% in 1980 to 18% and 14% in 2020. By 2050. But by 2050, India’s share is expected to reach 17%.
More important than this is the change in the age composition of the population, as alarming as it is. While the total population is expected to decrease by 113 million between 2020 and 2050, according to these projections, the number of people aged 65 and over will increase by 215 million, while the number of people aged 20 and under will decrease by 137 million. 64 will be reduced by 191 million. As a result, the proportion of the population over 65 years old will jump from 13% to 30%. For those under 20, it will drop from 24% to 15%, and for those aged 20 to 64, it will drop from 64% to 55%. The United Nations says that by 2100, people over 65 will account for a staggering 41% of the total population. This will be a country full of older men and women.
Can this be managed?
Two possible ways out can be ignored. China is too big, and almost certainly too hostile, to pursue a mass immigration route. Again, even if fertility rates could increase significantly very quickly, it would have no effect on the working-age population for less than 20 years, and not much for many years after that: it takes a long time for children to Mature. Furthermore, even if fertility rates do increase, remember that there are far fewer women of childbearing age than there were just a few decades ago. Thirty years of below-replacement fertility, combined with a socially destructive male bias, has reshaped the demographic landscape.
However, there do exist two related options: internal migration and retirement later. UBS believes that, at least for this decade, the decline in the aging workforce can be fully offset by shifting workers out of the still-large agricultural population and raising the retirement age.this Hukou The system that controls internal immigration and leaves many second-class Chinese citizens in their place must be dismantled. This is both an economic necessity and a matter of social justice. And, currently, The retirement age for men is still 60, for white-collar women it is 55, and for factory women it is 50.. These ages can and must be raised.
Also, please note that the most embarrassing problem in China today is that youth unemployment is so high that it no longer publishes data. This shows too little demand for labor, not those dire labor shortages, at least today. Furthermore, even by 2050, the dependency ratio will be well below the 1950 level. The difference, of course, is that the dependency ratio then was for the children, not the parents. Yet raising and educating children is also expensive. One reason we care more about the former than the latter is surely that our children are of more value to most of us. Of course, children are also the future, and the elderly are also the past. In addition, a country that is top-heavy with old people will be less educated and less dynamic than a country dominated by young people.
What is obvious is that the working-age population is expected to shrink by an average of 0.8% from 2020 to 2050, 0.5 percentage points faster than the total population, and the growth rate of per capita gross domestic product (GDP) will be much lower than the average population growth rate. Per capita GDP growth, GDP growth will be even slower. Still, if output per capita grows fast enough, GDP per capita can still grow quite quickly. Furthermore, this is not impossible, since productivity is well below levels found in countries close to today’s technological frontier. In fact, China is showing off quite a bit of innovation – just look at electric cars.
The skeptics are right, however, and this won’t happen without a lot of reform. The structural problems I discussed last week must be overcome. In addition to the domestic immigration and retirement reforms mentioned above, it is vital to improve the educational standards of young people and encourage the most innovative economy. External constraints must also be overcome. Can Xi Jinping’s country cope with such a huge challenge? This is a big question and one I will return to.
martin.wolf@ft.com
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