July 08, 2012
That is what listeners to a segment that bemoaned the fact that China’s population might decline in the decades ahead undoubtedly concluded. The piece presented the views of people who saw the prospect of a smaller Chinese population as being a potential crisis, but not one word from anyone who indicated that it could potentially benefit both China and the world.
In terms of global warming and demand on resources more generally, the more people there are in China and the world as whole, the greater the pressure on the environment. In fact, if one (wrongly) assumes, as this piece implies, that more Chinese will make each person in China richer then the negative impact on the environment will be more than proportionate to the increase in population.
The other part of this piece is incredible absurd is the claim that China will somehow be strained paying for a growing population of retirees. The piece includes this segment:
“FENG [a Chinese demographer]: The magnitude of the challenge brought about by population aging is mind-boggling. China now has about 180 million elderly population. In less than 20 years, by 2030, that number is going to be 360 million. That’s going to be larger than the total population of the United States right now.
LANGFITT [the NPR reporter]: How is the country going to pay for that?
FENG: It’s a very scary situation.
LANGFITT: As the population ages, health care costs are expected to soar. And with couples having fewer kids, there will be far fewer workers to pay for that health care. Again, Wang Feng.
FENG: I think the harm has already been done. So even if China, say, stopped one-child policy tomorrow, this new birth would not become adult labor until 20 years from now.
LIANG: The situation is actually pretty gloomy, pretty bad, pretty urgent.”
Okay arithmetic fans, let’s see how China can pay for this. If we look at the IMF’s projections for China, we see that they expect per capita GDP to rise by 58 percent from 2011 to 2017, the last year for its projections. This is a per capita growth rate of 8 percent a year. Let’s hypothesize that this growth falls by 75 percent (a truly remarkable slowdown) to just 2 percent annually for the remaining 13 years to 2030. That would mean that China’s per capita GDP would be twice as high in 2030 as it was in 2011, in spite of the fact that the country had twice as many retirees.
The implication of this fact is that all the workers in the country could have living standards are at least twice as high as they are today and that all retirees can also have living standards that are higher than do current retirees. In fact, the story is likely to be even more favorable since China currently devotes almost half of its GDP to investment. This share would fall sharply as the growth rate declines leaving much more for consumption. (Actually, standard growth measures are likely to understate the benefits of a declining population since they will not pick up the gains from less use of common assets like streets, parks, and beaches.)
So arithmetic fans, there is no story whereby the Chinese will suffer because of plausible declines in the size of their population. You can take a deep breath and go back to enjoying your morning coffee.
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