At a recent news conference, Chinese Premier Li Qiang (李強) said that the country’s demographic dividend has not disappeared, even though the population is declining.
He supported his claim with impressive-sounding figures: China has nearly 900 million working-age people out of a total population of 1.4 billion, with more than 15 million people joining the workforce every year.
Should these numbers be believed?
An examination of Chinese demographic data reveals clear and frequent discrepancies. For example, the Chinese National Bureau of Statistics said that there were 474 million births between 1991 and 2016, which is in line with the 478 million first graders recorded by the Chinese Ministry of Education between 1997 and last year.
For 2000, the bureau reported that there were 17.7 million births — a figure that aligns perfectly with the 17.5 million first graders in 2006. Yet, while the 2000 census showed only 13.8 million children under the age of one, there were 14.3 million ninth graders in 2014, implying a gross enrollment rate of 104 percent.
There are several reasons that Chinese demographic data are unreliable. For starters, China’s local governments have a strong incentive to inflate population figures. More residents mean larger fiscal transfers from the central government, including funds for priorities such as education, pensions and poverty alleviation. Likewise, households might claim to have more members to receive more benefits.
Politics provides another motive for exaggerating the birth figures. For example, to show that the shift from a one to a two-child policy worked — and benefitted the careers of officials — the Chinese National Health and Family Planning Commission announced 18.85 million births in 2016, a 27 percent increase from the previous year.
In Shandong and Zhejiang provinces, the reported increase was even larger at 56 percent and 75 percent respectively.
The bureau and even the UN’s World Population Prospects report published similar figures.
However, the two-child policy was introduced in January 2016, meaning that any resulting “baby boom” would not emerge until the fourth quarter at the earliest. So, how could there be such a huge spike in births in 2016?
The simplest explanation is that it never happened. The number of administered doses of the Bacillus Calmette-Guerin vaccine — which is required for every newborn — barely increased in 2016.
Moreover, there were only 17 million first graders last year — fewer than in 2006, meaning the actual births in 2016 might have been only 13 million.
Instead of surging as expected, the number of first graders last year fell year on year — by 5 percent nationwide and in Shandong, and by 1 percent in Zhejiang.
More than three decades of malfeasance by Chinese officials and demographers have so muddied the demographic data that no one — not even top officials like Li — knows the real numbers. What is clear is that they are nowhere near as favorable as Li suggests.
Even if more than 15 million people technically join the workforce annually, as Li says, one must recognize that about 3 million “work” only on paper, and — more importantly — about 22 million workers retire each year.
The average age of migrant workers increased from 34 in 2008 to 42 in 2021, and China’s prime-age labor force, aged 16 to 59, which underpinned the country’s economic miracle, began to decline in 2012, coinciding with a slowdown in GDP growth, from 9.6 percent in 2011 to 4.4 percent from 2020 to last year.
While population aging might not directly cause recessions, a higher aging index — the number of people aged 59 or older per 100 individuals younger than 15 — has a strong negative correlation with GDP growth, as does a higher median age and the proportion of people over 59.
A higher proportion of children aged 14 and under correlates positively with GDP growth.
These dynamics are already apparent across Chinese regions. With relatively younger populations, southern and western China are still growing, but in the Heilongjiang, Liaoning and Jilin provinces of northeastern China — where fertility rates fell a decade ahead of the rest of the country — the economic engine has stalled.
Although the Chinese government says that northeastern China’s economy grew by 5 percent annually from 2013 to 2019 and by 3 percent annually from 2020 to last year, the fourth national economic census showed that the region’s GDP in 2019 was the same as in 2012.
Just as a baker cannot make bread without enough flour, Li cannot deliver growth without enough labor. Aging alone could cause GDP growth to fall to 3 percent by 2028, and that does not account for the other economic “gray rhinos” that Li is likely to face during his tenure, including a housing bubble collapse and a government-debt crisis.
Nor will upgrading the quality of “flour” change this, as Li seems to hope when he says, as he did at his news conference, that rising education levels have put China on track to reap a significant “talent dividend.”
As Japan’s experience shows, attempting to make up for a shrinking workforce by improving education can backfire. As Japan’s enrollment rate for tertiary education has soared — more than doubling since 1992 — the number of young people willing to work in manufacturing has declined. From 1992 to 2021, the total number of manufacturing workers fell by 35 percent — more than double the decline in the prime-age workforce (17 percent) — causing Japan’s share of world manufacturing exports to plummet from 12 percent to 4 percent. The number of Japanese companies in the Fortune 500 fell from 149 in 1995 to 47 last year.
For China, overemphasizing higher education could cause massive infrastructure projects like the Belt and Road Initiative to become a drain on a weakened manufacturing base. It could also compound China’s demographic woes by reducing fertility.
To improve China’s economic prospects, Li must raise the retirement age, but while similar moves in the UK in 2011 and in France today have sparked major protests, it is better to launch gradual reform now than wait to implement it suddenly.
Li’s real challenge is to increase the number of births and avert a demographic collapse. Unfortunately, this will be nearly impossible.
Yi Fuxian is a senior scientist in obstetrics and gynecology at the University of Wisconsin-Madison.
Copyright: Project Syndicate
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