New York Fed: Volition Demographic Headwinds Hobble China’S Economy?

From the Federal Reserve Bank of New York's Liberty Street Economics blog, August 15:

China’s population is exclusively growing at a 0.5 per centum annual rate, its working-age cohort (ages fifteen to 64) is shrinking, as well as the percentage of the population that is 65 as well as over is ascent rapidly. Together, these trends volition act every bit a meaning restraint on the country’s economical growth. Nonetheless, at that topographic point are reasons to conclude that increase volition stay relatively rigid going forward, nigh notably because the ongoing shift from rural to urban jobs volition proceed to boost labor productivity for around fourth dimension to come.

China Has Cashed In on an Enormous Demographic Dividend
Demographics accept played a major purpose inwards China’s economical dynamism of recent decades, with the country’s gross domestic product increase averaging 10 per centum per twelvemonth from 1979 to 2010. Before this transformational smash period, China population was growing apace as well as the government, over the class of the 1970s, adopted diverse identify unit of measurement planning policies that culminated inwards the “one kid policy” inwards 1979. These policies contributed to a subsequent reject inwards the fertility rate, which roughshod from a combat over vi children per adult woman inwards 1969 to only nether ii past times 1990.

The resultant population dynamics led to a large swing inwards the ratio of the working-age population to the theme population (those nether fifteen as well as inwards a higher identify 64). As illustrated inwards the nautical chart below, that ratio surged from 1.2 inwards 1966, when China’s population skewed really young, to a acme of 2.8 inwards 2010, with the highest always recorded, every bit the youth population’s percentage of China’s overall population shrank as well as the aged cohort remained stable.

China’s economic scheme earned a “demographic dividend” from having a large decrease inwards its child-dependent population relative to its working historic catamenia population, every bit did the other highly successful economies of East Asia. Research suggests that these economies’ rigid increase experiences derived to a meaning score from having unusually large working historic catamenia populations, inwards proportional terms.

China’s dependency ratio, though, is straight off laid upwards for a steady decline; a United Nations projection traces a slide from 2.5 inwards 2017 to 2.1 inwards 2030 as well as 1.5 inwards 2050. Specifically, the working-age population is shrinking spell the percentage of the population aged 65 as well as over is surging. Such a reject inwards a developing country’s working-age cohort is unusual, every bit reflected inwards the nautical chart below. It compares the U.N. projection for China’s working-age cohort with those for Republic of Republic of India as well as Indonesia, the mo as well as 3rd nigh populous developing countries, respectively. Both of those countries are expected to run into their working-age populations grow at 1 percent per twelvemonth over the adjacent 10 years.



The aging of the population is likewise pushing China’s dependency ratio down. The percentage of the population that is 65 as well as over rose from seven per centum inwards 2000 to 10 per centum inwards 2015. It is projected to surpass 17 per centum past times 2030. Again, the projected trends for Republic of Republic of India as well as Republic of Indonesia are quite different, with the 65 as well as over cohorts inwards both countries exclusively ascent from v per centum inwards 2015 to viii per centum inwards 2030. ...

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