Does China Have Enough People?

The Economist looks at new Chinese census data, and asks an unusual question:

Does China have enough people? The question might seem absurd. The country has long been famous both for having the world’s largest population and for having taken draconian measures to restrain its growth. Though many people, Chinese and outsiders alike, have looked aghast at the brutal and coercive excesses of the one-child policy, there has also often been a grudging acknowledgment that China needed to do something to keep its vast numbers in check.

But new census figures bolster claims made in the past few years that China is suffering from a demographic problem of a different sort: too low a birth rate. The latest numbers, released on April 28th and based on the nationwide census conducted last year, show a total population for mainland China of 1.34 billion. They also reveal a steep decline in the average annual population growth rate, down to 0.57% in 2000-10, half the rate of 1.07% in the previous decade. The data imply that the total fertility rate, which is the number of children a woman of child-bearing age can expect to have, on average, during her lifetime, may now be just 1.4, far below the “replacement rate” of 2.1, which eventually leads to the population stabilising.

Slower growth is matched by a dramatic ageing of the population. People above the age of 60 now represent 13.3% of the total, up from 10.3% in 2000 (see chart). In the same period, those under the age of 14 declined from 23% to 17%. A continuation of these trends will place ever greater burdens on the working young who must support their elderly kin, as well as on government-run pension and health-care systems. China’s great “demographic dividend” (a rising share of working-age adults) is almost over ….

The census results are likely to intensify debate in China between the powerful population-control bureaucracy and an increasingly vocal group of academic demographers calling for a relaxation of the one-child policy. Their disagreement involves not only the policy’s future, but also (as so often in China) its past.

The Financial Times’ beyondbrics blog examines the likely consequences of this demographic turning point:

The Chinese economy has been described (by James Kynge, for one) as an elephant riding a bicycle – fine so long as it keeps going, but if it slows, it’ll cause an awfully big mess. Now, with the combination of a rapidly ageing population and rising wages, inflation in China is going to go up, and growth is going to slow.

As one government economist put it on Thursday, for China, ‘a major turning point is at hand ….’ 

Developed countries (and emerging markets too) have benefited from years of cheap Chinese manufactured products, which have helped usher in a decade of low inflation around the world. Is there any other country capable of picking up the slack?

China, faced with a demographic tipping point, may well win the Inflation Battle of 2011. But the war goes on, and if anything, it is set for a much more difficult next phase.