Emerging Chinese economy threatened by demographic scare

Beijing, Jan 20: With drastically falling birth rate, reduction in workforce and growing population of the aged people, China is facing a serious demographic problem like Japan. According to agencies the number of newborns fell to 17.23 million in 2017 from 17.86 in 2016. The Chinese workforce has shrunk by over five million while the population of the aged has increased putting pressure on the country’s social security system.

China is emerging as a global economic power registering an overall growth of 6.9 percent in 2017, but its demographic figures tell a different story. Despite the two children norm in 2015, the birth rate has declined to 17.23 million in 2017 as compared to that of 2016. This was stated by the National Statistics Bureau. At the same time the Chinese workforce i.e. population between the age group of 16-59 recorded reduction by 5 million in 2017.

On the other hand, the percentage of people above 65 continues to grow. By the end of 2017 their population was recorded at 11.4 percent of the total population as compared to 10.8 percent in 2016. That means China has 158.31 million people above the age of 65 and this is greater than the entire population of Russia!

Since rising to power in 2012, Chinese President Xi Jinping has gradually eased population controls. The infamous one-child policy, introduced in 1979 to control population growth, was revised towards the end of 2013, when couples were granted the right to conceive a second child, if one of the parents was an only child. Two years later, the one-child policy ended and all the couples were allowed to have two children.

The government's tough population control measures have reduced the number of new births by about 200 million over the last forty years, undermining the country's growth potential. This is what emerges from research conducted by Zhou Tianyong, deputy director of the Institute for International Strategic Studies of the Beijing Central Party School. "If no provision is taken to address it [the population decline] ... it will only increase the cumulative damage resulting from a reduction in the labor force on demand, income and GDP production," says Zhou.

The effects of demographic changes are tangible. The government is under increasing pressure as provincial pension funds quickly deplete reserves, as the aging of the population puts a strain on the social security regime. According to a report by the Academy of Social Sciences, about half of the funds are in deficit and the burden of supporting older people is up to the younger workforce.

The study reveals that the problem is particularly severe in the north-eastern provinces of Heilongjiang, Jilin and Liaoning, where the percentage of retired people has increased, while the workforce has decreased as the workers move elsewhere. The rich coastal areas, like Guangdong, and cities like Beijing have more money to cover pensions because they tend to attract migrant workers.