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Those who still have not gotten the
message that China's expected growth rate of 7% is not going to happen are advised to consider the viewpoints of
Nicholas Eberstadt who studies demographics for the
American Enterprise Institute.
Bloomberg covers Eberstadt's
demographic projections in an interesting
article on China’s Pending Population Crash
Today’s most
important population trend is falling
birthrates. The world’s
total fertility rate -- the number
of children the average woman will bear
over her lifetime -- has dropped to 2.6 today from 4.9 in 1960. Half of the people in the world live in countries where the fertility rate is below what
demographers reckon is the replacement level of
2.1, and are thus in shrinking
societies.
As Eberstadt points out, we
can make predictions about the next 20 years with reasonable
accuracy. The U.S.’s
traditional allies in western Europe and Japan will have less weight in the world. Already the median age in western Europe is higher than that
of the U.S.’s oldest
state: Florida. That median age
is rising 1.5 days every week.
Japan had only 40 percent as many births in 2007 as it had in
1947.
These countries will have
smaller workforces, lower savings rates and higher government debt as a result of their aging. They will probably
lose dynamism, as well.
All these effects will, in turn, almost certainly make these countries even less willing
than they already are to spend money on their armed forces. Americans who want Europe to bear more of the
free world’s military
burden -- or even provide for its own defense -- are probably going to be disappointed. So will those who
expect Europe to take on humanitarian missions. It won’t
even be able to maintain its current weight in future debates about the values of peace
and democracy.
China’s rise over
the last generation has been stunning,
but straight-line projections of its future power
and influence ignore that its
birthrate is 30 percent below the replacement rate.
The Census Bureau predicts
that China’s
population will peak in 2026, just 14 years from now.
Its labor force will shrink, and its over-65 population will
more than double over the next
20 years, from 115
million to 240 million. It will age
very rapidly. Only Japan has aged faster -- and Japan had the great advantage of growing rich before it grew
old. By 2030, China will
have a slightly higher
proportion of the population that is elderly than
western Europe does today
-- and western Europe, recall, has a higher median age than Florida.
China’s Challenges
China, notoriously, has another
demographic challenge. The normal sex ratio at birth is about 103 to 105 boys
for every 100 girls. In China, as a result of the one-child policy and sex- selective abortion, that ratio
has been 120 boys for every 100 girls. From 2000 to 2030, the percentage
of men in their late 30s who have never been married is projected
to quintuple. Eberstadt doesn’t
believe that having an “army of unmarriageable young men”
will improve the country’s economy or
social cohesion.
Foreign-policy thinkers can often lose
sight of demographic
trends, Eberstadt says, because from a policy makers’ view “they tend to look really glacial. If it’s
not happening in the next 48 to 72 hours, it’s not in the inbox.” But “population change gradually and very unforgivingly alters the realm of the possible.”
World
Population Prospects and the Global Economic
Outlook
Enticed by that lead-in, inquiring minds are digging further into the views of Nicholas Eberstadt.
Please consider the following snips from World Population Prospects and the Global Economic Outlook, a 42 page
working paper by Nicholas
Eberstadt.
China
By almost all accounts today, no major economy has
more radiant prospects for the coming decades than China. Such assessments are predicated on extrapolation of the country‘s
extraordinary recent
record of performance into the future. Over the past generation, China‘s economic
transformation has been nothing less
than dazzling. In the three decades following Deng Xiaoping‘s
1978 moves toward overarching
systemic reform, by Angus
Maddison‘s reckoning,
China‘s GDP grew almost ten-fold: averaging an estimated 7.5% growth a year for 30 years—and if we go by other sources, China‘s growth rates would have been even more rapid. No economy in world history has ever grown so
fast for so long. Over this same interim,
China also emerged from self-imposed autarky to become a major player in the world economy. Today it is number
one in both merchandise
exports and in holdings of foreign exchange reserves. In aggregate, China now appears to be the world‘s second largest economy, edging out Japan last year.
Chinese policymakers confidently predict the country‘s torrid growth will continue on into the future; Beijing officially
forecasts annual growth rates of roughly 7% per year between now and 2030. This rosy prognosis is accepted by many in the world financial community, and even by some of the
intelligence and security services that advise Western governments. But there is a major problem with this optimistic
reading of China‘s economic future—it does not seem to take into account
the demographic tempests that China will have to weather in the years immediately ahead. A wide sweep of new, powerful and fundamentally unfamiliar demographic forces
are now gathering in
China in the years ahead,
and will buffet the country simultaneously.
China is confronting the demographic version of ―the perfect
storm,‖ and these
new demographic realities
may ultimately force us
to revise today‘s received wisdom about ―China‘s rise.‖
China‘s
future demographic profile will
differ substantially from its current
population situation, mainly because
of the country‘s
low levels of fertility. Although there are some inconsistencies and problems in
official Chinese population data, population specialists believe that China became a sub-replacement fertility
society about two decades
ago—and that birth rates have fallen far below the replacement level since then. The Census Bureau, for example, believes that China‘s current TFR is about 1.5—over 30% below
the level required for
long-term population stability.
Figure 4. Projected Population Structure: China,
2010 vs. 2030
In this future China, there
would be fewer people under the age of 50 than in China today—and many fewer Chinese in their 20s and early 30s. On the
other hand, there would be many
more elderly Chinese than today—vastly more, in fact, in their 60s, 70s and 80s.
This dramatic shift in China‘s
population profile has four major economic and
social implications for the years immediately ahead. The first is the end of labor force growth. Over the past three decades of hyper-rapid development in China, the
country‘s working age population rose by over two-thirds—growing by an average of about
1.8% a year. By contrast, as we have already seen, China‘s total working age population is set to fall between 2010 and 2030. (By
Census Bureau projections, China‘s
working age manpower will be peaking in
2016—just 5 years from now; by 2030, it stands to be shrinking by almost 1% a year).
Furthermore, as noted above, China‘s manpower pool will be graying over these years; in fact, by 2030, there would be more than four older (50-64 years) prospective workers for every three younger
counterparts (15-29 years)—a
complete inversion of the current
ratio.19 With a smaller
and much greyer Chinese workforce on the
horizon, sustaining the growth
rates of the recent past would be a truly
counterintuitive proposition.
Second, there is the broader issue of rapid and pervasive population aging. Though Chinese authorities may have clamped down on births for three decades, the country will be experiencing
a population explosion of senior citizens over the next twenty years
(progeny of the pre-population
control era). In 2010,
about 115 million Chinese were
65 or older; by 2030, the corresponding
number is projected to approach 240
million—meaning that
China‘s cohort of
senior citizens would be soaring at
an average rate of 3.7% per year.
By 2030, according to Census
Bureau projections, China‘s median age will
be higher than the USA‘s—and according to projections by Chinese
demographers, over 22% of rural China‘s
population will be 65 or older.
(In aged Italy and
Germany today, the corresponding
proportion is 20%.) How China‘s
coming tsunami of senior citizens
is to be supported remains an unanswered question. As yet,
China has no national public pension system in place, and only
the most rudimentary of
public provisions for rural health care. Meeting
the needs of its rapidly growing elderly population, however, will undoubtedly place economic and social pressures on China that no country of a comparable income
level has ever before had to face.
Five Reasons
China's Growth Rate
Projections Will Not Happen
1.
Peak
Oil
2.
Unsustainable,
very troubled State-Owned-Enterprise (SOE) investment
model
3.
Regime
change will shift from investment export driven model
to consumption driven
model and the transition will be
extremely painful
4.
Crash of China's
property bubble
5.
Demographics
Those are five powerful reasons supporting the thesis China's growth is not sustainable. Any one of them could sink
growth prospects. Collectively,
they represent an overwhelming obstacle to rosy growth projections.
For more on points two and three,
including a pair of bets between Michael Pettis at China Financial Markets
and The Economist magazine, please see 12 Predictions by Michael Pettis on
China; Non-Food Commodity Prices
Will Collapse Over Next Three
to Four Years; Nails in
the Hard Landing Coffin?
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