- Hubert Walas
China's Demographic Problem.
The most populous country in the world? China. For centuries, or even millennia, the answer to this question was obvious. However, there are many indications that due to the policy of the Chinese Communist Party, the answer to this question may now be different. Why is China's demography suddenly a serious problem for Beijing?
One Couple, One Child
At the time of the establishment of the People's Republic of China on October 1, 1949, the population of the country was just over half a billion inhabitants, but by the end of the 1970s it had almost doubled. In the 1960s, the average Chinese woman gave birth to an average of six children during her lifetime. Such high demographic dynamics aroused the fear of the communist authorities that their resources would be insufficient to feed such a massive population. This fear stemmed from and was also deepened by the tragic experiences of Mao Zedong's Great Leap Forward Policy. The program, which was supposed to be a breakthrough in development, eventually led to the death of 45 million Chinese from starvation and repression between 1959 and 1962. Therefore, starting in the 1970s, programs to reduce high fertility, which were previously perceived as threats to socio-economic stability, now began to be implemented. In 1973, the Chinese government launched a family planning campaign with non-binding "late, long and little" guidelines. It promoted later marriages, longer intervals between births, and fewer births overall.
In the 1970s, the communist authorities managed to halve the birth rate - from 6 to 2.8. However, the program most often associated with state birth control in China is the One-Child Policy, which has been enforced since 1980. In the 1990s, 440 million people, or about 35% of the total population, followed the "one couple, one child" principle. Additionally, nearly 670 million, which was 54% of the population, were subject to the one and a half child policy on whose basis rural couples were entitled to have a second child if their first was a girl. Another 10% of the population could have had two or more children. Traditionally, male children had been preferred, especially when it came to the first child. It was very important, especially in rural areas, because sons inherited the family surname and property, and were responsible for the care of their elderly parents.
When most families were confined to one child, having a girl became highly undesirable, increasing the number of female abortions. In addition to the pressure to perform abortions, there had also been a sharp increase in spiral / IUD installations and sterilization, mainly in rural areas. In late 2015, the Chinese authorities decided to abandon the "one-child policy", giving couples the opportunity to apply for permits to have more children. Despite a temporary, and only slight improvement, this decision did not lead to a permanent reversal of unfavorable trends, and the problems created by the one-child policy will continue to plague Chinese society for a long time.
Recent information indicates that in 2020, China might witness its first population decline in 50 years with it dropping again below 1.4 billion. If this is correct, then it will be 10 years earlier than the official forecasts had originally projected. And it might mean that India will become the most populous country on the planet, however, we won’t know for sure until Delhi conducts its next national census. There were plans for this in 2020, but they were abandoned due to the Covid 19 pandemic.
Breaking the Natural Balance
As a consequence of the introduction of the restrictions outlined before as well, as the socioeconomic changes, the fertility rate dropped below 1.7 at the end of the 1990s and has remained so until today. It is assumed that a fertility rate between 2.1 and 2.15 is a value ensuring ample replacement of generations.
The decline in fertility should not be attributed solely to the One Child Policy, as in most countries of the world this rate is falling with the material progress of society, even though solutions similar to the Chinese one have not been implemented. The One-Child Policy did not only contribute to limiting population growth. An important problem stemming from it is the imbalance between the number of men and women in society, which resulted from the abortion policy and cultural conditions that favored having male offspring. This increased the phenomenon of men without families, which is associated, for example, with an increase in crime. The generation of single children is also a problem for retirees, as traditionally children looked after their parents in their elder years. In a situation where a family has only one child, such assistance is difficult.
At the end of 2019, the number of Chinese citizens over the age of 60 exceeded 254 million, which is 18% of the total population. This number is set to rise to 300 million in 2025 and 400 million in 2035, which will mean that more than 25% of the population will be of retirement age. According to a report published by the Chinese Academy of Social Sciences, the demographic dependency ratio - measuring the number of dependents in relation to the total working-age population - would increase from 47% in 2019 to 96% in 2050. This result means that in the middle of the 21st century, per one retiree in China there will be one working person.
It is worth noting that these estimates are based on government data that can be manipulated to minimize the scale of the problem in the eyes of international opinion and even of its own citizens. Some researchers, such as Dr. Yi Fuxian, indicates that the actual number of births could actually be several million lower than official statistics state. According to Yi, the State Bureau of Statistics of the PRC has seriously overestimated the actual birth rate and population size of the country. The calculations presented by Yi show that the real population of China in 2019 should be 1.279 billion, or 121 million less than the officially reported 1.4 billion. Yi also challenges the not-so-optimistic birth rate figures, which he believes are 10 million instead of the 14.65 million reported by the State Bureau of Statistics.
What About Retirement?
One of the biggest problems with the current system in China is the statutory retirement threshold of 60 years for men, 50 for women employed in companies, and 55 for female civil servants. These limits were established in the 1950s and are increasingly divergent from reality where the average life expectancy in 2018 reached 76.7 years, or slightly less than in the USA where it stands at 78.5.
The decline in the working-age population along with a dynamic increase in the retirement age will generate additional pressure on the PRC's economic system. The burdens on the benefit payment system and public services will both increase. According to a report published in April 2019 by the Chinese Academy of Social Sciences (CASS), the sum of money accumulated in China's basic pension funds will drop to zero in 2035 after reaching 7 trillion yuan in 2027, or 1 trillion USD. After this period, it will begin to record a deepening deficit between inflows and expenses, which by 2050 may reach several trillion yuan. Also, the vulnerability to the crisis is strongly conditioned by geography. The richest provinces on the east coast have recorded surpluses for years, but the less developed provinces in the north and west of the country are already facing shortages of resources.
The difficulties in maintaining the liquidity of the pension system will most likely force the authorities to raise the retirement age, which for men stands at 60, and for women at 50 or 55 depending on occupation. Large social transfers are also being considered to encourage couples to have a second and even subsequent child. In 2013, the authorities in Beijing announced that raising the retirement age was inevitable and initially set 2020 as the cut-off date. The announcement of raising the retirement age was also included in the text of the 13th Five-Year Plan for 2016-2020. Ultimately, however, the CCP did not pass the changes due to strong social resistance. The rapidly aging society has a negative reaction to all signs of an attempt to introduce a controversial reform. According to a 2019 poll by Changjiang Daily in Wuhan, more than 80% of 96,000 online respondents were against delaying the retirement age, and this mainly due to the health conditions of older people and the difficulty of finding a suitable job in the dynamically changing labor market. In China, more than 50% of the population is still employed in industry and agriculture, and for many Chinese, physically demanding work up to the age of 65 can become an unbearable burden. However, social resistance is not limited to the elderly. This phenomenon also applies to young people for whom the planned changes will mean limited career opportunities.
Little Emperors
According to MacroPolo calculations, in 2018 people aged 55 to 59 accounted for 7.3% of the working-age population in China. If the authorities decided to raise the time of retirement by one year (61 for men and 56 for women), this would mean 5 and 4.5 million fewer new jobs in 2019 and 2020, respectively. One of the arguments against adopting such a solution is a high number of university graduates (8.7 million in 2020) entering the Chinese labor market every year. They are mostly people raised in the narrative of "spectacular economic growth," the effectiveness of authoritarian technocratic solutions, and the "Chinese Dream." There is also the issue of the so-called generation of "little emperors," or only children for whom the whole family provided a very high quality of life, thus building a sense of uniqueness and high expectations for their future career. Resources that would normally be shared by siblings were concentrated on one child, who thus gained the opportunity to study at home or abroad. Graduates of universities focus on self-fulfillment, while facing the pressure of families and their environment to launch a brilliant and successful career. This translates into higher expectations towards the labor market and more frequent changes of the place of employment. Raising the retirement age to the level typical for Western countries (approx. 65-67 years) would lead to the retaintment of people within the labor market who, under the current regulations, may retire much earlier.
The process of shrinking the working age population, coupled with insufficient productivity growth, could lead to a repeat of the Japanese scenario. Japan, which was characterized by expansive growth in the 1980s, entered a phase of economic slowdown in the 1990s, which continues to the present day. It should be noted that Japan was much better prepared for the crisis than the Chinese economy, because at the beginning of the 1990s it was one of the highest developed countries and leaders of innovation. In terms of GDP per capita, China still clearly differs from the most economically developed countries in the world. In 2020, the PRC authorities announced their success in creating a "moderate prosperity society," noting that GDP per capita exceeded $10,000. For comparison, the average rate for the European Union is $34.9 thousand, for the US it is $65.3 thousand, and for Japan $40.2 thousand. The distance is also illustrated by the Human Development Index, which for China is still relatively low (85th worldwide) if compared with the countries of the West.
In discussions about China's future, much is said that China grew old before it could get rich. The demographic crisis means that China can no longer rely on the demographic dividend and low production costs. Wages in the society have been growing dynamically for years and the shrinking number of employees forces the transformation of the development model to be based on internal consumption, services, high technology industry, and more rational investments. Admittedly, the scope and amount of benefits in China still significantly diverge from the standards in highly developed countries which partially reduces the burden related to an aging population. Nevertheless, the delayed demographic bomb is ticking, and worst of all, from the perspective of the Beijing authorities, any solution will generate losses and problems.
