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Is China Is Facing A Demographic Time Bomb?

November 5, 2009

Is China Is Facing A Demographic Time BombMartin McCauley writes: China has the largest population in the world, which is now totalling about 1.35 billion, although its growth rate has fallen, due to the government’s one child policy.

China’s economic growth has been traditionally fuelled by a large market of rural labourers, willing to move to cities to seek employment. This migrant labour force is now thought to number about 150 million. It is not included in official statistics and those involved do not qualify for social benefits or state housing.

However, the era of the plentiful supply of labour is coming to an end. China’s population is ageing. There are now about 169 million, or 12.8 per cent of the population, who are over 60 years of age. China joined the ranks of ageing societies in 1999 when it recorded 10 per cent of people as pensioners. The increase in the ‘golden oldies’ over the last ten years has been about 50 million.

People are living longer – a testimony to economic prosperity – and if the present trend continues, by 2050, there will be only three people of working age to every pensioner instead of the present nine to one. This is an alarming prospect for a country in which state social spending has been low in order to channel as much as possible into investment for economic growth. One minister claimed recently that China still has about 250 million who can be classified as poor, almost all living in rural areas.

China may hit its target of 8 per cent growth this year. This is regarded as the level necessary to create about 25-30 million jobs a year in order to maintain social stability. The working age population is now thought to be about 930 million, or just over 70 per cent of the population. This may peak in 2016 when just under a billion will be of working age. Afterwards it will decline. The dependency ration at present is declining but this will be reversed in 2013 when dependence will start increasing permanently.

Despite the 8 per cent growth rate expected this year there is a serious unemployment problem. Officially only 4 per cent of the labour force is unemployed but this does not include the numbers of unemployed among migrant workers. The demands of the current labour market require skills which many do not have. In September, official statistics revealed that the earnings of graduates were equal to or below those of migrant labourers. This points to the fact that universities and colleges are pouring out graduates who are not qualified to fill jobs in a rapidly changing economy. Traditionally the Middle Kingdom has concentrated on the lower end of the market but now finds that world demand for cheap goods has contracted sharply. China needs to move up market and tens of thousands of firms which have closed will never open again.

What are the authorities doing to counter the rapidly ageing population? In Shanghai, the one child policy has been abandoned and couples are being encouraged to have two children. Shanghai has the highest proportion of ‘golden oldies’ among its population in China.

Chinese policy makers, during the next 25 years, have to devise solutions to a rapidly ageing population. A social safety net will be necessary as old people require more medical and social care than young people. At present about half of family incomes are saved to cope with educational, medical and other expenses. There is also a huge gulf between the haves and the have-nots in the Middle Kingdom. The haves will have to begin paying more to sustain the less fortunate. Is China ready for such a revolution?

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One Response to “Is China Is Facing A Demographic Time Bomb?”

  1. Daniel Knight on February 19th, 2010 9:30 pm

    China may use it’s unemployed excess for a war, and in my opinion at around that point China will be broken up into separate kingdoms.

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