Home News China’s big problem: its population is aging and its economic growth is stagnating

China’s big problem: its population is aging and its economic growth is stagnating

0
China’s big problem: its population is aging and its economic growth is stagnating

Although Chinese authorities have described economic growth prospects as promising, a Chinese demographer warns that the country is unlikely to escape the middle-income trap.

China must carry out radical reforms to bridge the gap between its economy and that of the United States, while combating the rapidly aging workforce, stagnating manufacturing sector, falling fertility rate and local government crises, Yi said , senior scientist at the University of Wisconsin-Madison. He warns Fuxian.

Earlier this month, the Chinese government again set a 5% annual economic growth target after announcing that the country’s gross domestic product surpassed 5.2% last year, a figure that some economists have questioned.

The world’s second largest economy could well surpass this goalaccording to Lin Yifu, dean of the Institute of New Structural Economics at Peking University and a member of the standing committee of the Chinese government’s top political advisory body.

In a recent interview with Chinese state media outlet Global Times, Lin said that Beijing has taken into account the challenges posed by its aging population and has boosted investments in education to increase the productivity of its youngest workers.

Failed to address China’s high youth unemploymentwhich the Government stopped reporting on last year before introducing a new reporting methodology that excluded those in rural areas and who had stopped looking for work.

Lin indicated that he believed that China could not only achieve high-income country status in two years, but also reach half the GDP per capita of the United States by 2049, and that its economy as a whole would double the size of the United States. Per capita income is the average income per person in a specific area in a given time period.

Target: 2049

Year 2049 will be significant for the leadership of the Communist Partysince it will be the centenary of the founding of the People’s Republic of China.

Lin noted that of 53 countries currently struggling with an aging workforce, 27 had a GDP per capita at least half that of the United States when they entered this phase, while the GDP per capita of the other 26 remains less than 50 percent of that of the United States. —In other words, they are “getting old before they get rich.”

The economies in the second group have experienced greater growth despite the demographic burden, Lin stressed, as its workforce regains lost ground on the educational front. This has led to greater productivity and innovation to offset the decline in the number of people of working age, he said.

“Physiological laws affect economic laws. Lin Yifu does not understand the laws of physiology, and his argument that China’s economy has a growth potential of 8% “It’s like arguing that an 80-year-old can walk as fast as a 30-year-old,” Yi Fuxian wrote in a recent op-ed for Voice of America in response to Lin’s optimistic forecast.

Yi pointed out that People aged 65 or older already represent 15.4 percent of the population. No country with such a high proportion of elderly enjoyed 4 percent GDP growth over the next 12 years, she said.

People are born, age, sick and die, and the same goes for the economy.. “Aging changes people’s physiology, psychology and behavior and affects production, consumption and innovation, thereby reducing economic vitality,” he stated.

Young people drive consumption

The demographer added that younger generations boost consumption and increase economic confidenceso the proportion of young people has a positive correlation with economic growth.

Yi also questioned the politician’s view that late joining the high-income club can be a net benefit. The workforce of two of China’s neighboring countries, South Korea and Taiwan, began to decline in the mid-2010s.

Posteriorly, “The average age and proportion of people over 65 began to surpass those of the United States in 2010 and 2022, respectively,” he said. Taiwan’s GDP per capita began to stagnate after reaching 42% of that of the United States in 2010, and South Korea’s GDP per capita fell from 53% of that of the United States in 2018 to 41 percent last year.

Yi stated that China faces an uphill battle if you want to get out of the middle-income trap, a term coined by economists Indermit Gill and Homi Kharas in 2007. The country’s per capita income stood at just over $12,500 at the end of 2023.

Assuming a “lucky” GDP growth rate of 3 percent in 2028 and 1.5 percent in 2035, China’s per capita income would probably not exceed $15,426 and $17,893respectively, in terms of current prices, Yi said.

The per capita income of the United States, already estimated at more than $80,000, would also increase, which would make it even more difficult for China to achieve it.

source