Demographic Change in China Affecting the Economy
By admin June 29, 2018


The economy of China is big, and it accounts for a large portion of world economy. According to the International Monetary Fund, the Chinese economy is the world’s second largest economy by nominal GDP. Since 1992, the GDP growth rate has never decreased to below five percent, and it has led the world’s economic growth for the past three decades. However, as recent data shows, the GDP growth rate in China is experiencing a downward trend. One of the main drivers for the weakening Chinese economy is the demographic shift currently occurring in China.

In every economy, the working-age population produces goods and services. This working-age population is defined as those aged 15 to 64. The working-age population in China peaked at 925 million in 2011. Since then, it has annually decreased by three million over the past seven years. According to the Ministry of Human Resources and Social Security, the working-age population will drop to 700 million by 2050. This shrinking working-age population will make it harder for China to sustain its highly labor-intensive manufacturing economy, which China has relied on for decades.

Many argue that the One-Child policy in China had created this demographic timebomb. Since its introduction in 1979, the government had limited Chinese couples to have only one-child to control the total population. Though the policy was abolished in 2015, Chinese couples are hesitant to have two children for economic and social reasons. As more and more women are entering the workforce, they tend to work for a longer period of time rather than leaving for child birth and care. In addition, raising two children results in an increased financial burden for the family, which the one-child policy generation has not been prepared to undertake.

Furthermore, the large working-age population is rapidly approaching retirement and requiring services focused on the senior population. This means more social welfare spending is needed to support the increasing senior population in China and the decreasing workforce has to support the increased spending, which, if not managed correctly, could result in increased economic debt. Therefore, the question facing China today is whether or not the country is prepared for the demographic change?


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