Could China’s population start to decline?
This means that if there are currently 100 working-age people available to support 20 elderly people, by 2100, 100 working-age Chinese people will have to support 120 elderly Chinese people.
The 1.73% annual average decline in China’s working-age population sets the stage for much weaker economic growth unless productivity picks up quickly.
Higher labor costs, driven by rapidly shrinking labor, are expected to push low-margin, labor-intensive manufacturing out of China to labor-rich countries -countries such as Vietnam, Bangladesh and India.
Already, manufacturing labor costs in China are twice as high as in Vietnam.
At the same time, China will need to devote more of its productive resources to providing health, medical and elderly care services to meet the demands of an increasingly elderly population.
Modeling by the Center for Policy Studies at the University of Victoria in Australia suggests that without changes to China’s pension system, its pension payments will increase fivefold, from 4% of GDP in 2020 to 20% of GDP in 2100.
For resource-exporting countries like Australia, these changes will likely require a shift in exports to manufacturers outside of China. For importers of goods, including the United States, the source of goods is expected to gradually shift to new emerging manufacturing hubs.
Despite predictions that it will be “the chinese century“, these population projections suggest that influence could shift elsewhere – including to neighboring India, whose population is expected to overtake China in the next decade.
* This is an edited version of an article that originally appeared in The Conversation, and is republished under a Creative Commons license.
Xiujian Peng works for the Center for Political Studies at Victoria University. She has received funding from several organizations over the past five years, including the Shanghai Academy of Social Sciences, Henan Agricultural University, and CHN Energy Economics and Technology Research Institute.
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