China's Changing Demographics Will Drive Its Economy and Politics

I have often-repeated the point that China's demography is a force to be reckoned with. Its rapid fertility decline put it on the path to economic development, which encouraged the government to loosen up on the urbanization process. Now, however, we have a rapidly aging, and rapidly urbanizing country. How is that going to work out? My thanks for Dr. Dobbins for pointing me to an article in Stratfor today that assesses what the folks at Stratfor think all this means. Spoiler alert--it's not good.

China's urban population may grow by as many as 230 million people in the next 15 years. But most growth will take place not in metropolises like Beijing, Shanghai and Chongqing but in the myriad small- and medium-sized satellite cities around them. And as residents flock to these cities, China's working-age population will begin to decline, and its elderly population will grow dramatically.

Together, these processes will underpin major changes not only in China's overall economic structure, but also in the financial, fiscal and political relationship between central and local government. The added burdens facing small- and medium-sized cities, especially those located deep inside China that are sequestered from mainstream global trade, will be substantial and perhaps socially and politically destabilizing.

The government has made clear its intent to limit immigration into top-tier coastal cities, and it will continue to use tools like the household registration (hukou) system to make it harder for all but the most established non-resident workers to live and raise families in these cities. Meanwhile, it will use those same tools -- relaxed hukou restrictions, programs to bring rural laborers into small- and medium-sized inland cities, greater job availability and other social and economic incentives -- to encourage laborers from the interior to migrate or re-migrate to these cities.

The above paragraphs summarize the analysis, which includes additional detail about the fact that an aging labor force will be languishing in interior cities that are essentially off the national political and economic grid. At the same time, a predominantly male rural population will be trying to figure out what to do with life. The demographic patterns for the future are pretty clear. Less clear is how the government will respond to them, but we can be sure that the government is keen to avoid something that would become the "Chinese Spring."