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Age will weary the Chinese miracle

Talk of the so-called China dominated Asian Century ignores one important factor in the equation: China like the rest of northeast Asia is a rapidly ageing zone. As the grandfather of the region, most of the attention is on Japan. In terms of the implications for the power balance into the future, much more attention should be paid to China. While the fact of China ageing is well known, less appreciated is what this actually means for the future of Asia’s largest and most rapid rising power. ‘Demography is not destiny’ as French sociologist Auguste Comte once said. But it does shape the future prospects for countries gradually but relentlessly, and on this account, China is in trouble.

When China began its reforms in 1979, there were around seven working persons for every retiree. The current ratio is about 5.5 for every retiree. By 2015, more people will formally leave the workforce than enter it. And by 2035, there will be 2.5 working persons for every retiree. Put differently, 40 per cent of the population will be of retirement age in 2035.

The age profile of the working population also matters since workers tend to be at their most productive from the late 20s to their mid-40s. By 2035, there will be 4.5 older workers (50 to 64 years old) for every three younger counterparts (15 to 29 years old) which is the direct reverse of the situation currently.



It is also extremely difficult to reverse these trends. For one, China’s ageing population is largely the result of the dramatic increase in average lifespan, which increased from under 65 years old in 1980 to 75 years currently. The declining fertility rate from just under three children per woman in 1980 to about 1.5 in 2011 also represents changes in the rising lifestyle and expectations of many Chinese families. Because of the ‘one-child policy’ in place since 1979 – combined with the widespread Chinese preference for sons over daughters – the number of child-bearing women is now artificially limited. There will be a surplus of about 40 million men of marriageable age by 2020.

China is far from alone in facing an ageing demographic, even if its one-child policy means that the rapid rate of ageing puts the country in unchartered territory. The certainty that China will be the first major country to grow old before it grows rich (or even moderately so) is a function of its low economic base resulting from the disasters of the Mao Zedong years, and the modern increase in life expectancy.

 

Rest of the article: http://www.businessspectator.com.au/bs.nsf/Article/china-economy-asian-century-demographics-retiremen-pd20121002-YP7FT

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