Risks & Trends

'Demography + Technology is Destiny'
'Demography + Technology is Destiny'
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China's demographic challenges

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May 27, 2021

Today in 'Risks & Trends' we look at a trend:

  • China's demographic challenges.

China recently released its once-in-a-decade census.

  • The census showed that the number of births nationwide fell to the lowest level since 1961, following a nationwide, manmade, famine caused by Mao’s “Great Leap Forward” that killed tens of millions of people, and that China’s total population could peak in the next few years.

In reviewing the analyses about the impact these changes will wreak, I was reminded of a presentation I made at Columbia in response to the much-discussed When China Rules the World, published in 2012.

  • Not long after that book was published, I gave the talk titled, ‘Why China Won’t Rule the World.’

My argument was that demographics – an aging population, a shrinking workforce, and other similar factors – would stymy China’s rise.

At the end, though, I said don’t count China out – China has a deep reservoir of creativity to bring to these issues.

  • To illustrate this, I ended with a few slides of Chinese contemporary paintings (this was before China’s great strides in tech) that had revitalized genres, such as figure painting, that critics and historians believed played out.

Underlying my analysis was the conventional wisdom that ‘demographics is destiny.’

  • And for most of history, this has pretty much been shown to be right.

As Nicolas Eberstadt of the American Enterprise Institute points out in his ‘With Great Demographics Comes Great Power’ in Foreign Affairs:

  • ‘Unlike economic or technological forecasts, population projections tend to be reasonably accurate for at least a few decades, since most of the people who will be living in the world of 2040, for example, are already alive today.’
  • ‘And although such projections cannot predict the future, they can offer a rough guide to the emerging contours of international politics—the changing realm of the possible in world affairs.’
  • ‘Demographics may not be destiny, but for students of geopolitics, they come close.’

Challenging or perhaps just modifying this view, Gideon Rachman of the Financial Times wrote in ‘Lousy Demographics Won’t Stop China’s Rise’:

  • ‘The old maxim ‘demography is destiny’ no longer holds in the same way that it used to.’
  • ‘A large, expanding and youthful population has driven the rise of nations for much of human history.’
  • ‘Great powers needed warm bodies to put on a battlefield and citizens to tax.’

‘But a shrinking and ageing population may not have the same gloomy implications in the 21st century.’

  • ‘The great-power struggles of the future are unlikely to be decided by vast land battles.’
  • ‘If technological prowess, rather than hordes of young men, is the key to future power then China is well placed.’

Then, along my theme of don’t count China out, I found 'China Bets on Productivity Over Population to Drive Its Economy' in Bloomberg:

  • “China has 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.

In explaining that growth strategy, Bloomberg noted: ‘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.’
  • ‘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.’

And ‘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.’

Even before the census revealed what we had expected, Xi Jinping had been putting a big bet on technology to raise productivity to meet China’s demographic challenges.

  • This is clear from initiatives like ‘Made in China 2025’ and even the new ‘Dual Circulation Strategy.’

All we can do now is watch to see if that deep reservoir of Chinese creativity I cited can amend the ‘demographics is destiny’ to become ‘demographics + technology is destiny.’

One problem that no amount of ingenuity seems able to solve is the seemingly intractable ‘persistence of the country’s alarming excess of males relative to the global norm,’ noted by Columbia’s Shang Jin-Wei notes in ‘Sex and China’s Economy’ and the consequences of this gap that radiate beyond China:

  • ‘China’s “excess” of male births results in a large number of young men being unable to marry.’
  • ‘To enhance their relative competitiveness in the dating and marriage markets, young men – and especially parents with unmarried sons – increase their savings rates substantially.’
  • ‘The rise in the male-female ratio in China’s pre-marital-age cohort from 1990 to 2007 accounted for about half of the increase in the household savings rate during that period.’

‘An increase in the savings rate tends to boost a country’s trade surplus.’

  • ‘A rise in China’s male-female ratio may have contributed to between one-third and one-half of the increase in its trade surplus with other countries.’

‘The sex imbalance thus likely underpins an important source of tension between China and the US.’

  • ‘Yet bilateral engagement has paid scant attention to this linkage.’

But with no solution in sight, negotiators could do little more than acknowledge the impact and agree to moves that might mitigate the effect – not the problem itself.

  • Even China’s deep reservoir of creativity has had a tough time overcoming the Chinese people’s long-held preference for sons.

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