Thursday, January 26, 2017

The World's Most Populous Country Is Turning Gray

Shrinking labor force would create a drag on consumption; Lopsided population balance puts strain on economic growth.

January 26, 2017

The world’s most populous country is turning gray at an accelerating pace.

That aging has big implications for China’s economic growth, which could be undermined as the labor force declines sharply from 2021 to 2030. It also strains the nation’s expenditures for public services, insurance, and health care, and puts a dent in domestic consumption.

China’s latest population development plan, released by the State Council late Wednesday, projects that about a quarter of China’s population will be 60 or older by 2030. That’s up from 13.3 percent of the population in the country’s latest census in 2010.

The number of children 14 or younger will decline to 17 percent over the same period, the plan estimated. About 36 percent of the population in 2030 will be 45 to 59, it said. That age group accounted for about 20 percent of the total population in the 2010 census.

A shrinking labor force would further erode China’s competitive edge in manufacturing but would also be a drag on consumption, now a major pillar of the economy as it transitions away from old smokestack drivers of growth.

A year ago, authorities took a big step to try to add to the country’s population pipeline by scrapping the more than three-decade-old one-child policy. That didn’t result in the initial boost that demographers had projected.

Births in 2016 reached 17.86 million, the most since 2000, rising by 1.91 million from 2015, the National Health and Family Planning Commission said this month. That still falls short of the official projection. Last June, the ministry estimated there would be an increase of 4 million new births every year until 2020. China will continue to implement the two-child policy to promote a balanced population, the plan said.

Even so, the latest plan said birth rates could remain low. The total population is now expected to peak around 2030 and begin to decline after that. The plan set a population target of 1.42 billion by 2020, and 1.45 billion by 2030. It also supported more urbanization, with more than 13 million people projected to move to cities from rural areas every year between 2016 and 2020.

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