Thursday, August 13, 2015

The Impending Crisis That Will Impact China's Economy

China's recent moves to devalue its currency is an obvious move to boost its flagging economy by making the price of their products more appealing to consumers around the world.  While that may prove to be a short-term bandaid to China's economic problems, there is a crisis of a different sort that will prove to be almost impossible to solve.

Back in 1978, China introduced its controversial one child policy, just as its population was set to cross the one billion mark.  This was implemented by the nation's central government in September 1980 and sought to reduce the nation's burgeoning population growth to levels that would not strain the nation's resources.  While the program was generally "universal", there were exceptions to the rule, for instance, when a first child was born handicapped, parents were allowed to have more than one child.  The one child policy resulted in a significant drop in China's fertility rate as shown here:

By 2013, the World Bank measured China's fertility rate at 1.67 births per woman, down from nearly 6 children per woman in the late 1960s.  The current level is well below the replacement fertility rate of approximately 2.1, meaning that future generations will be less populous than the previous ones as you will see later in this posting.

On top of the dropping fertility rate, there has been a corresponding increase in life expectancy as shown here:

Life expectancy (measured from birth) has risen from less than 60 years in the late 1960s to 75.35  years in 2013, similar to the life expectancies in the developed world.  Life expectancy has improved as a result of China's growing economy which has led to widespread improvements in nutrition and health care.  Unfortunately, the dropping fertility rate and rising life expectancy are working together to create a population and economic crisis.

While the figures are a bit dated, a 2010 article by Feng Wang at the Brookings Institute notes that there is one number that characterized China's demographics - 160 million:

1.)  China had more than 160 million internal immigrants who have moved geographically as they have sought better lives through work.  

2.) China has more than 160 million citizens who are 60 years and older.

3.) China has more than 160 million families that have only one child.

As the years pass, these numbers will change significantly, particularly the number of Chinese aged 60 and above which is projected to reach 300 million by 2030.  This aging population will prove to be problematic since it will reduce the number of labourers necessary to keep China's economy growing.

Now, let's look at the problems that the one child policy has created?

1.) It has skewed the nation's gender distribution.  Since China has traditionally been a patriarchal society, male children are generally preferred, particularly in rural areas.  For a generation, the number of boys being born has outstripped the number of girls, reaching a peak of 1.22 to 1 in 2008 as shown on this graphic:

This means that for every 122 boys born, there are only 100 girls.  This compares to an average of 1.07 for the entire world.  This has been achieved, at least in part, through the use of selective abortions.  As the decades pass, there will be between 20 and 30 million Chinese men who will be unable to find wives.  A study by Jane Golley et al suggests that the proportion of unmatched, low-skill males of reproductive age could be as high as one in four by 2030 and that any beneficial effects of policies undertaken to restore the balance could take decades to reduce the gender imbalance.

2.) China has an aging population problem as shown on this population pyramid:

The small base of the pyramid is showing that China has a relatively small population of males and females under the age of 19.  This is far different that the population pyramid of the early 1970s as shown here:

The broad base of this pyramid is typical of a developing nation with a high fertility rate and a relatively low life expectancy.

China's aging problem is going to get even worse in the future as shown on this projected population pyramid from 2040:

This pyramid quite clearly shows that fewer and fewer younger Chinese will be economically supporting more and more older Chinese, a direct result of the one child policy and the increase in life expectancy.

Here is a graphic showing how China's elderly population is projected to rise out to 2050:

By 2050, nearly one in four Chinese will be elderly, the highest level in the world.

China's recent moves to loosen its one child policy will eventually reduce the gender and demographic stresses on the nation's economy, however, as I noted above, it will take more than one generation to make a significant difference.  By that time, China's economic miracle could well be over and the world will no longer be able to rely on China's might as its economic driver. 


  1. Mao was a complete idiot when he encouraged large families. China's population doubled from 500 million to a billion in a generation. Now they pay the price as you have pointed out. As to 30 million men with no possibility of finding mates, historically populations like that were given a bow and a horse and sent out to conquer and find themselves wives. Might this have some relevance to China's increasing military attitudes?

  2. China has had 340 million abortions since 1972.