Wang feng - Reversal of China’s Demographic Fortune
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Wang Feng discusses China's reversal in demographic fortune from a period of strong population growth fueling economic expansion, to a future of population aging and decline. China benefited tremendously from the congruence of high fertility and mortality decline in the late 20th century, but fertility has now dropped below replacement level. As a result, China's population will age rapidly in coming decades as the number of elderly doubles by 2030 while the labor force begins to decline. This demographic shift poses profound economic and social challenges as China transitions to a new growth model powered by productivity and consumption, not physical capital and labor.
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Wang feng - Reversal of China’s Demographic Fortune
- 1. FUNDACIÓN RAMÓN ARECES Conferencia: Un cambio de rumbo en la fortuna demográfica de China Conference: Reversal of China’s Demographic Fortune Wang Feng Madrid, 22 de marzo de 2012
- 2. Reversal of China’s Demographic Fortune (Fundación Ramón Areces, Madrid, March 22, 2012) Wang Feng
- 3. o The China Miracle o The Demographic Factor in China’s Rise o Reversal of Fortune o What’s Ahead?
- 4. The China Miracle Economic growth: second largest, largest exporter and manufacturer, soon to be the largest economy Poverty reduction: 500 million What drove the recent growth?
- 6. The Chinese Growth Model Growth in the last thirty years has been based on a heavily physical capital and labor intensive model Internal constraints (costs): resources, environment, and inequality External constraints: export market, resources The demographic factor
- 7. The Demographic Factor: Congruence of Two Booms (population age distribution, China) (Mason and Wang 2007)
- 8. (Mason and Wang 2007)
- 9. Economic Growth (demographic dividend: divergent paths) (Mason and Wang 2007, Wang and Mason 2008)
- 10. China’s Demographic Fortune (annual growth rate of effective support ratio, 1982–2000) (Wang and Mason 2008)
- 11. Reversal of Fortune (annual growth rate of effective support ratio, 2013–2050) (Wang and Mason 2008)
- 12. New Demographic Era Annual birth number dropped by nearly 10 million from the peak in the late 1980s Growth rate only a third of the level in the late 1980s
- 13. Driving Force: Low Fertility
- 14. Anomaly No More 9.0 1975 Saudi Arabia1975 Kuwait1975 2005 Regression Linear 99% CI 6.0 UAE 1975 Equatorial Guinea 2005 TFR 3.0 China 1975 China 2005 0.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 GDP per capita (PPP, log)
- 15. Age Structure, China (1982, 2010, 2040)
- 16. Prospect of Rapid Population Aging Number of elderly (65+) will double in the next 20 years, from 117 to 238 million Share of elderly population will go up from 8.7 to 16.8% in 20 years, and to over ¼ by 2042 Japan: 9.1% in 1980, 22.6 in 2010, and 35% by 2040
- 17. How does China’s Aging Differ from Other Societies? Pace Size Weak social and familial infrastructure
- 18. China’s Accelerated Demographic Transition: Life Expectancy
- 19. China’s Accelerated Demographic Transition: Fertility Decline
- 20. Pace of Aging, Selected Countries
- 21. Old before Rich, China and its Neighbors GDP per capita when population aged 65+ reach 9%, in 1990 International Geary- Khamis dollar. Source: Maddison 2010.
- 22. Declining Support Ratio (Number of working persons per 60+, China and other BRIC economies)
- 23. Declining Support Ratio (Number of working persons per 65+, China and other large economies)
- 24. Changing Labor Supply Total size(20-59) reaches a plateau, moderate increase in the next 10 years Young labor (20-24) reached peak and will decline by nearly 20% in the next one and 1/3 in the next two decades
- 25. Smaller but more productive? Available college age youths actually smaller due to educational expansion – shortage of unskilled young labor A more productive labor force in the long run
- 26. Fragile Families (share of women aged 35-49 with one or no child, 2005) 38.6% of all women of this age group
- 27. Fragile Families (share of women aged 35-49 with one or no child, urban China, 2005) 67.2% of all women of this age group
- 29. What’s Ahead? Aging population: labor, consumption, savings and government spending Growth will slow down Needs a new model driven by domestic consumption Productivity increase and human capital deepening Social infrastructure building These tasks interact and will be extremely challenging
Editor's Notes
- Similarities between the design of the China Pavilion of the 2010 World Expo and the age structure of its host city, Shanghai. Since 1993, due to its extremely low fertility, Shanghai has been experiencing a net loss in natural population growth (growth of local resident population not counting migrants).
- During the closing decades of the 20 th century and the turning of the 21 st , China produced one of the most miraculous economic booms in recent human history. The boom benefitted over a fifth of humanity who live in China, and profoundly affected those both within and outside of China. Among others, China’s economic boom benefited from a favorable population age structure. At the start of the reforms and economic take off in the early 1980s, a large share of China’s population was in the teen ages, reflecting the large birth cohorts of the late 1960s and early 1970s, a condition itself called for more drastic population control.
- As China’s reforms accelerated and its economic growth took off in the 1980s to 2000, the large birth cohorts of the 1960s and 1970s also moved into the most productive years, as shown by their concentration in the ages of late 20s and early 30s in 2000. These young and hard-working laborers provided the key source for China’s economic growth, but they are a one-time, non-repeatable historical event, an outcome of the demographic transition.
- The last two decades of the 20 th century, the annual growth rate of net producers far exceeded that of net consumers, generating what is known as the demographic dividend. In the last decade, such a dividend is quickly coming to an end. Two years from now, the growth rate of net consumers will exceed that of net producers, producing a negative demographic dividend.
- During the last two decades of the 20 th century China had clearly a very favorable population age structure. The 1.28% annual rate on average for this period could account for at least 15% of the growth in per capita income during this period.
- What awaits China is a substantial demographic toll as its population ages in the coming decades. China will be in the ranks of Japan and Taiwan, faring far worse than countries such as the US and France. Assuming an economic growth rate of 5 percent annually, a -.45 support ratio takes away about 10% of per capita income growth.
- China’s one-child policy followed rather than preceded the most significant fertility decline in China. By the time when the policy was formally announced in 1980, fertility measured by TFR was already more than halved, to a level that this not much above the replacement level. During the first decade of its implementation, fertility level hardly declined further. A new phase of decline began in the early 1990s, when fertility level nationally fell below the replacement level.
- The last two decades of the 20 th century, the annual growth rate of net producers far exceeded that of net consumers, generating what is known as the demographic dividend. In the last decade, such a dividend is quickly coming to an end. Two years from now, the growth rate of net consumers will exceed that of net producers, producing a negative demographic dividend.