China’s Achilles heel
A comparison with America reveals a deep flaw in China’s model of growth
Why I picked up the article:
This article got over 880 comments on its website. Articles on China usually get certain number of comments not only because of its population but also that aging China is Asia’s next big concern.
What is the difference between China’s demographic concern and Japan’s one?
Do economies heavily depend on demography? (Will America posses its position?)
China will overtake America as the world’s largest economy (at purchasing-power parity) in 2017. But China has its deadly point of unseen weakness: demography.
①. Total fertility rate: 2.6(1980)=>1.56(2010) *Shanghi 0.6(2010) =>1.51(2020) óAmerica 2.08(2010) and rising
②. Population: 1.34billion(2010)=>peak(2026)=>under 1.3(2050)=>below 1 billion(2060) óAmerica rise by 30% in the next 40 years
③. Average ages(median): 22(1980)=>34.5(2010)=>49(2050) ó America 37(2010)=>40(2050)
China will grow old before it gets rich. China will have a bulge of pensioners before it has developed the means of looking after them
“4-2-1 phenomenon”=each 1 child is responsible for 2 parents and 4 grand parents
A national pension problem =unfunded pension liability is roughly 150% of GDP
By 2030 China will be importing workers from outside, rather than exporting them.
①. China’s workforce: 72%(2010)=>61%(2050) of its population
②. Old-age dependency ratio: 11(2010)=>42(2050) ó America 20
China needs large-scale immigration but has problems. Unlike America, China isn’t an open, multi-ethnic society with long history of immigration and strong legal and political institution (the absence of predictable institution).
Developed countries have same kind of problem and China has certain advantages, low tax rate and low public expectation of welfare. But still China is unique in 2 respects: poorer aging country and more rapid demographic transition.