Saturday, July 18, 2009

China's looming demographic challenges

I've been catching up on China's demographics lately, and have been fascinated to read a presentation Richard Jackson, a senior fellow at the Center for Strategic & International Studies' Global Aging Initiative, gave in May. It's well known that China's one child policy has had a profound effect on the country's development, that the country will get old before it gets rich. But the numbers Jackson cites are staggering: in 1972, when Japan's elderly comprised the same proportion of its population as China in 2005, its per capita income (in 2005 PPP) was nearly $15,000. America hit that share in 1943, when its per capita income was more than $15,500. China? Just over $4,000. The number of dependents (children and elderly) per 100 working age people will rise from 47 in 2010 to 87 in 2050. With a public pension system that Jackson estimates only covers one in three people, and smaller families meaning fewer children to support their parents, something has to give. He argues for pension reform. I agree. But as Japan, the US and other developed countries confront their own aging societies, it's worth asking how these social challenges will affect countries' foreign policy. I think we should expect rapidly aging countries to be more inwardly-focused, for profits of companies to decline as they are expected to shoulder more of the retirement burden, and for countries to revise their economic models based on a shrinking, not a growing, labor force.


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