– Stefano Magni
The end of the year was marked by alarming signals from China. Not only for Apple, the American giant of hi-tech, whose stock has collapsed in the stock market due to the contraction of the Chinese market, but for the economic system of the People’s Republic as a whole. In fact, 2018 marked a setback for Chinese industrial activity, the first decline for over a year and a half.
And the forecasts for 2019 are not positive: the World Bank estimates a growth of 6.2%, substantial if we compare it to the European economies, but the lowest figure in over 30 years for China. Other observers believe that in 2019 the Chinese economy could grow even less than 6%. And, as if that were not enough, unemployment also grows. These signals should not be underestimated because they may already be the symptoms of a long-term crisis. And that has a determining cause: not so much the trade war with the US of Trump (which affects, at most, in the short term), but the demographic decline.
It is a self-inflicted demographic crisis, bearing the signature of former president Deng Xiao-ping. Together with the first economic reforms, in fact, in 1979 he had immediately imposed the “one-child policy.” No more than one child per couple, at least until 2015. This imposition was only slightly reduced with the 2015 reform: for the past two years couples can have up to two children and not in all circumstances. Maybe too little, too late. As Wang Zhicheng points out on AsiaNews, the fertility rate “was on average 1.18, the lowest in the world.” Wang Zhicheng quotes a study by Professor Yi Fuxian, a professor in the USA at the University of Wisconsin-Madison, in which the Chinese case is compared to the Japanese one. Even Japan, in fact, recorded growth rates that make it compete directly with the US, then the demographic crisis of the 90s led to economic stagnation in a short time. “And since then the fertility rate in Japan was 1.42, while the current Chinese rate is lower, which means that the Beijing crisis will be even harder than Tokyo’s.”
It is not a question of isolated opinions and studies by those unsympathetic with the Chinese regime. According to UN estimates, based on the same official Chinese statistics, the population of the People’s Republic will reach 1.4 billion inhabitants in the early 2020s, but is set to fall rapidly thereafter. With current fertility rates, the working age population will fall by 5% by 2030, an inevitable decline considering that all 2030 workers are already born. By 2050 a further 20% of the workforce is expected to decline. The dependency ratio of retired people (the ratio between people out of work and current and potential workers) could increase up to 44% by 2050.
This will result in a reduction in the workforce and an increase in social spending. The increase in social spending will correspond to a lower number of taxpayers. Therefore there will inevitably be greater indebtedness. It will be a serious social problem, especially as the population is aging rapidly just when an entrepreneurial middle class was forming. With a population of over 65-year-olds exceeding 7% (a threshold already exceeded widely), the World Health Organization considers a society as old. And an aging society normally gives less room for innovation.
The problem of inequality, which has also arisen due to the one-child policy, will weigh even more. Since the one-child policy has been followed more in the more affluent cities than in the poorer countryside, the richest have been able to leave greater inheritance to single children, while the poorest have divided their few belongings among more brothers. It will be a further problem: a generational conflict that is added to the social conflict in the near future of China.
(From La Nuova Bussola Quotidiana, 2019©AP. Used with permission)
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