This blog is intended to go along with Population: An Introduction to Concepts and Issues, by John R. Weeks, published by Cengage Learning. The latest edition is the 12th (it came out in 2015), but this blog is meant to complement any edition of the book by showing the way in which demographic issues are regularly in the news.

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Saturday, February 10, 2018

Can China Cope With its Demographic Dividend?

Demographic dividend is the term applied to the potential for economic gains during a period of rapid fertility decline following a mortality decline. It is a transition period in which the prior higher fertility accompanied by lower mortality generates a large number of people of working age, while current rapid declines in fertility lower the number of young dependents and the prior high mortality has produced a relatively small number of people at the older dependent ages. The key word in that definition is TRANSITION. It is not a permanent state of affairs, and if a society does not use that transition wisely and plan for the post-transition period, there will be trouble. This is where China seems to find itself at the moment, as we have been reminded this week by a report from Bloomberg on the "Debt Bomb" associated with aging in China, and a story this week in the Economist discussing China's attempt to cope with this "bomb" by generating a new baby boom.

The debt bomb is largely related to the pension obligations that the government took on in the 1990s to deal with its growing older population--the generation that had forsaken a large family and generally will have only one child to look after them in old age. The government is going to have go into deeper debt to pay out these pensions. That will work for awhile but eventually someone is going to have pay off that debt. It seems as though the government assumed that a rise in the birth rate would take care of that by ramping up the younger population to previous levels. Thus, they got rid of most of the provisions of the one-child policy a couple of years ago, as I noted at the time.
Unwinding the one-child policy was supposed to help. But figures released in January confirm that after briefly boosting birth rates, its effect is petering out (see chart). Chinese mothers bore 17.2m babies last year, more than before the rules were relaxed but 3.5% down on 2016. Wang Feng of the University of California, Irvine, says the number of births was 3m-5m lower than the projections from the family-planning agency when the authorities were debating whether to change the policy, and below even sceptical analysts’ estimates.

The Economist suggests that the government now seems to be moving in a direction to push "traditional" Chinese values that emphasize the maternal role of women. However, a return to patriarchy is unlikely and, as I discussed a few months ago in reference to South Korea, more gender equality, not less, is the likely key to higher fertility in these very low birth rate countries. At the same time, it seems to me that the Chinese government needs to own up to the fact that its demographic dividend is coming to an end and the future is not going to be like the past two or three decades.

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