20 April 2012

China's Vulnerable Future

Over the past 30 years, China’s total fertility rate—the number of children a woman can expect to have during her lifetime—has fallen from 2.6, well above the rate needed to hold a population steady, to 1.56, well below that rate (see table). Because very low fertility can become self-reinforcing, with children of one-child families wanting only one child themselves, China now probably faces a long period of ultra-low fertility, regardless of what happens to its one-child policy. _Economist
China is changing, and in ways that are generally unanticipated by most China analysts. Simplistic straight line extrapolations of recent trends far into the future, lack the needed nuance to be considered reliable. Wise analysts look much more deeply into the changing demographic.
China is ageing at an unprecedented pace. Because fewer children are being born as larger generations of adults are getting older, its median age will rise to 49 by 2050, nearly nine years more than America at that point. Some cities will be older still. The Shanghai Population and Family Planning Committee says that more than a third of the city’s population will be over 60 by 2020. This trend will have profound financial and social consequences. Most obviously, it means China will have a bulge of pensioners before it has developed the means of looking after them. Unlike the rest of the developed world, China will grow old before it gets rich. Currently, 8.2% of China’s total population is over 65. The equivalent figure in America is 13%. By 2050, China’s share will be 26%, higher than in America. In the traditional Chinese family, children, especially sons, look after their parents (though this is now changing—see story on next page). But rapid ageing also means China faces what is called the “4-2-1 phenomenon”: each only child is responsible for two parents and four grandparents. Even with high savings rates, it seems unlikely that the younger generation will be able or willing to afford such a burden. So most elderly Chinese will be obliged to rely heavily on social-security pensions. China set up a national pensions fund in 2000, but only about 365m people have a formal pension. And the system is in crisis. The country’s unfunded pension liability is roughly 150% of GDP. Almost half the (separate) pension funds run by provinces are in the red, and local governments have sometimes reneged on payments. But that is only part of a wider problem. Between 2010 and 2050 China’s workforce will shrink as a share of the population by 11 percentage points, from 72% to 61%—a huge contraction, even allowing for the fact that the workforce share is exceptionally large now. That means China’s old-age dependency ratio (which compares the number of people over 65 with those aged 15 to 64) will soar. At the moment the ratio is 11—roughly half America’s level of 20. But by 2050, China’s old-age ratio will have risen fourfold to 42, surpassing America’s. Even more strikingly, by 2050, the number of people coming towards the end of their working lives (ie, those in their 50s) will have risen by more than 10%. The number of those just setting out (those in their early 20s, who are usually the best educated and most productive members of society) will have halved. _Economist
As in the Economist article, many analysts are fixated upon the intermediate- and long-term demographic implications of China's one-child policy. But just as interesting are the policy's psychological effects on the Chinese people themselves. The lack of cousins, uncles, aunts, nieces, nephews, and siblings, leads to a sense of entitlement, alienation, and egocentrism which has barely begun to be explored by social scientists -- for reasons of political correctness, as well as out of a basic cluelessness. Besides the demographic changes, are the inevitable problems that result from deep seated corruption within China's financial institutions, its military, its political structures, and its bloated state owned enterprises. China's people know that they are not being told the truth, and they are struggling against censorship and oppression to get the truth out. China is in for interesting times ahead.


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Blogger neil craig said...

I suspect fertility may be hihly susceptible to economic pressure. Historically children have been peasnat's pension fund, and this is still the case in Africa. In developed countries children are increasingly costly, mainly because of education, pester power and housing costs. I remember reading that in Britain the highest fertility is among the poor, who get welfare payments and the rich, to whom the money is less of a concern & have nannies and boarding schools.

In which case the fertility problem, either way, is soluble, at least in any wealthy country with a growing economy, without enforcing a one child policy, simply by applying money.

Saturday, 21 April, 2012  
Blogger al fin said...

"...the fertility problem, either way, is soluble, at least in any wealthy country with a growing economy, without enforcing a one child policy, simply by applying money. "

Whether or not such a thing is possible in any given situation, depends upon a large number of factors.

The fertility problem for affluent countries is best solved by the invention of a sophisticated, high quality, artificial womb.

Saturday, 21 April, 2012  

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