China | Demography | Aging : the long-term implications

Canada and Europe are not alone in dealing with important demographic shifts. And worries about increasing recruitment problems, workforce shortages and skills gap are widespread. But there might be more critical situations. For instance, China is just beginning its huge demographic transition.

In an article published on brookings.edu, Wan Feng qualifies China as a “demographic overachiever” and analyses the long-term implications.

China : An overachiever ?

Yes writes Feng, “in the global process of demographic transition in the second half of the twentieth century. Its mortality decline was unparalleled in human history among populations of significant size, consequently setting the stage for rapid population growth. In turn, rapid population growth laid the foundation for an unprecedented state intervention in birth control. China’s fertility decline in the closing decades of the twentieth century was perhaps even more extraordinary for its speed and especially for the measures taken and the authorities involved. With China’s fertility now well below replacement level, what lies ahead for this demographic overachiever?” he asks before examining three issues related to China’s demographic transition.

“Demographic transition in China began with a highly compressed process of mortality decline, with a substantial improvement in life expectancy in a matter of two decades. Around 1950 life expectancy at birth for Chinese females… was 46 years. … In the next 50 years, China accomplished what it took these other countries a century to achieve, an increase in life expectancy from the 40s to over 70 years.” recalls Feng.

This “remarkable improvement in life expectancy set the stage for rapid population growth in China.” But “China’s fertility decline was even more compressed than its record mortality decline” such that, “in roughly half a century, China completed its transition from a low rate of natural increase due to high mortality and high fertility to a low rate of natural increase as a result of low mortality and low fertility” summarises the author.

Prospects for population decline and accelerated aging

After reviewing China’s main demographic parameters, Feng concludes “if fertility remains below replacement level, by the end of the century China will have a population size only about half of what it is now.”

Economic implications: Dwindling demographic fortune

“Rapid population aging and sustained population decline in China have far reaching implications for China’s and the world’s economy. In the last 25 years China has witnessed unprecedented economic growth and increase in the standard of living. As China enters a new era of low fertility and accelerated population aging, its economy will have to undergo a fundamental transformation to respond to the underlying demographic shifts.” writes Feng.

The economic boom in China in the last three decades has been driven by many factors but one of the key factors for economic growth is “capital investment” as predicted by economic theory.

But, adds the author, “China’s economic boom has relied on another crucial factor, namely a young and productive labor force. This large labor force, a non-repeatable historical product of the rapid demographic transition, was present fortuitously as the Chinese economy was about to take off. … By now, China has largely exhausted its demographic dividend…” such that “as a result of China’s very low fertility in the last two decades, the era of abundant young and inexpensive labor will soon end.” concludes Feng.

And, “as the young population declines, domestic demand for consumption may weaken as well, because young people are also the most active consumers. and because of its major role in the global economy, the impact of China’s demographic change will not be limited to its own geographic boundaries.”

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