Monday, February 25, 2013

China's Demographic Challenge

From the Financial Times

China's demographic structure has been a benefit for growth hitherto but will soon turn into a burden.

As Michael Pettis points out in his newsletter:
The one-child policy imposed at the end of the 1970s changed the subsequent age structure of the Chinese population quite dramatically and, as a side effect, created a kind of demographic boom for China. Over the next three decades, as the huge population of baby boom children matured and joined the labor force, and a relatively small number of workingmen and women grew old and retired, China’s working population grew much more quickly than the overall population. The number of working-age Chinese grew, if my memory serves, by between 1.5% and 2% a year on average since the late 1970s.

Because so few children were born after the late 1970s, this surge in the working population was associated with a huge improvement in China’s dependency ratio. A declining number of non-working-age Chinese could be supported by a rising number of working-age Chinese. 
The demographic dividend caused by the one-child policy is now of course creating a worsening dependency ratio as a declining number of workers supports a longer-living number of old people.

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