From the Federal Reserve Bank of New York's Liberty Street Economics blog, August 15:
China’s population is only growing at a 0.5 percent annual rate, its
working-age cohort (ages 15 to 64) is shrinking, and the share of the
population that is 65 and over is rising rapidly. Together, these trends
will act as a significant restraint on the country’s economic growth.
Nonetheless, there are reasons to conclude that growth will remain
relatively strong going forward, most notably because the ongoing shift
from rural to urban jobs will continue to boost labor productivity for
some time to come.
China Has Cashed In on an Enormous Demographic Dividend
Demographics have played a major role in China’s economic dynamism of
recent decades, with the country’s GDP growth averaging 10 percent per
year from 1979 to 2010. Before this transformational boom period, China
population was growing rapidly and the government, over the course of
the 1970s, adopted various family planning policies that culminated in
the “one child policy” in 1979. These policies contributed to a
subsequent decline in the fertility rate, which fell from a bit over six
children per woman in 1969 to just under two by 1990.
The resultant population dynamics led to a large swing in the ratio of
the working-age population to the dependent population (those under 15
and above 64). As illustrated in the chart below, that ratio surged from
1.2 in 1966, when China’s population skewed very young, to a peak of
2.8 in 2010, among the highest ever recorded, as the youth population’s
share of China’s overall population shrank and the aged cohort remained
stable.
China’s economy earned a “demographic dividend”
from having a large decrease in its child-dependent population relative
to its working age population, as did the other highly successful
economies of East Asia. Research
suggests that these economies’ strong growth experiences derived to a
significant degree from having unusually large working age populations,
in proportional terms.
China’s dependency ratio, though, is now set for a steady decline; a United Nations
projection traces a slide from 2.5 in 2017 to 2.1 in 2030 and 1.5 in
2050. Specifically, the working-age population is shrinking while the
share of the population aged 65 and over is surging. Such a decline in a
developing country’s working-age cohort is unusual, as reflected in the
chart below. It compares the U.N. projection for China’s working-age
cohort with those for India and Indonesia, the second and third most
populous developing countries, respectively. Both of those countries are
expected to see their working-age populations grow at 1 percent per
year over the next ten years.
The aging of the population is also pushing China’s dependency ratio
down. The share of the population that is 65 and over rose from 7
percent in 2000 to 10 percent in 2015. It is projected to surpass 17
percent by 2030. Again, the projected trends for India and Indonesia are
quite different, with the 65 and over cohorts in both countries only
rising from 5 percent in 2015 to 8 percent in 2030. ...
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