Risks & Trends

'China Bets on Productivity Over Population to Drive Its Economy'
'China Bets on Productivity Over Population to Drive Its Economy'
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China's demographic challenges

4

May 27, 2021

‘Beijing has a two-pronged approach to maintaining economic growth as its population shrinks.’

  • ‘First, it intends to slow the decline of the urban workforce by raising the retirement age and encouraging migration of more of the country’s 510 million rural residents to cities.’ [see first chart above]
  • ‘Second, it plans to raise productivity -- a measure of economic output per worker -- with the latest five-year plan emphasizing better vocational education and more investment in scientific research, automation and digital infrastructure.’ [see second chart above]

‘Chi Lo, senior China economist at BNP Paribas Asset Management, estimates that a universal retirement age of 65 and loosening of internal migration restrictions could add at least 150 million to the urban workforce by 2035.’

  • ‘As a result, “the population peaking doesn’t make much of a difference in the next 10-15 years,” he said.’

‘Lauren Johnston, a China economics and demography expert at SOAS University of London, says, the population, mainly due to rising education levels, should become more productive.’ [see chart above]

  • ‘Nearly 9 million Chinese people graduated from university last year, up from 1 million in 2000.’
  • ‘ “China’s younger people are much, much more educated than older people,” she said. “Whereas in Japan the elderly are professionals, in China they are not losing the level of human capital that the “old after rich” countries are.” ’

‘Because it’s betting on productivity gains, demographers don’t expect China’s government to launch an all-out effort to raise births.’

  • ‘And while European countries and the U.S. have been more willing to increase the number of overseas-born workers, China is more likely to follow east Asian neighbors by tightly controlling immigration.’

‘ “They have been plotting their whole growth strategy to be congruent with demographic change,” said Lauren Johnston, a China economics and demography expert at SOAS University of London.’

  • ‘ “China’s role as the labor-intensive factory of the world has to go. They have to move to capital-intensive growth.” ’

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