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China Declares Victory Over Rapid Population Rise as Focus Shifts to Aging
China declared victory over rapid population growth as the release of its decennial census signaled the focus will turn to managing the impact of a faster- than-expected rise in the number of older people.
China had 1.34 billion people as of Nov. 1, the Beijing- based National Bureau of Statistics said yesterday. While still the most populous country, the higher birth rate of India’s 1.2 billion people puts it on course to take the title when the South Asian nation holds its next census in 2021.
Success in capping the population growth through the three- decade-old one-child policy presents China’s leaders with another problem as the swelling ranks of retirees create pressure to boost social welfare programs and pose a risk to the economic growth needed to fund them. The over-60s make up 13.3 percent of the population, 1 percentage point more than forecast and half as much again as in India, United Nations data show.
“The working age population is due to start falling within the next three or four years,” said Jim Walker, managing director at Hong Kong-based Asianomics Ltd. and former chief economist at CLSA Asia-Pacific Markets. “These 9, 10 percent growth rates people have become accustomed to are not sustainable for very much longer.”
Economic growth will slow “as demographic trends continue, highlighting the need to rebalance the economy over the next decade to prepare for such a transition,” RBC Capital Markets analysts, including Hong Kong-based Brian Jackson, wrote in a report published today. Growth would likely slow to 8 percent-10 percent in the coming 5-10 years, from the average 11.2 percent over the past five years, they said, citing government officials.
India will overtake China as the world’s fastest-growing economy by 2013 as it adds six times more workers to its labor pool, Morgan Stanley said in a report last year. People 14 years old and under make up 16.6 percent of China’s population, a decline of 6.3 percentage points from the 2000 census. Almost one in three Indians are in that group, Bloomberg data show.
China risks having to support retirees at per capita wealth levels that are only a fraction of aging developed countries and needs a better pension system to avoid what Goldman Sachs Group Inc. said is the danger of growing old “before getting rich.”
“The aging population is set to add fiscal pressure on the government in the medium and long term, which makes it imperative to put in place a well-functioning pension and health care system as soon as possible,” said Chang Jian, a Hong Kong- based economist with Barclays Capital who previously worked at the World Bank and Hong Kong Monetary Authority.
With more than $3 trillion in foreign exchange reserves, the government “has deep pockets now” and should be able to manage the aging of the country as long as economic growth rates remain high, Chang said.
China’s slowing population growth is a product of its family planning system and the policy of limiting urban residents to one child per woman, Ma Jiantang, head of the National Statistics Bureau, told reporters in Beijing yesterday. Annual population growth was 0.57 percent between 2000 and 2010, half a percentage point lower than the 1.07 percent annual growth between 1990 and 2000, according to the census figures.
“Our national basic policy of family planning has been well implemented and the overly rapid population growth momentum is effectively under control,” Ma said. Still, the proportion of people over 60 years old was 2.9 percentage points higher than in 2000, and that trend is “gradually accelerating,” according to the statistics bureau.
The trillions of dollars China’s hundreds of millions of workers will need in retirement savings may be a boon for global lenders and asset managers.
UBS AG (UBSN), Blackrock Inc. (BLK) and State Street Corp. (STT) help China’s National Social Security Fund invest assets overseas, according to the International Monetary Fund. China’s 856.8 billion yuan ($131.8 billion) national pension fund may increase its global investments and has 18 billion yuan invested with private-equity funds, Wang Zhongmin, vice chairman of the National Council for Social Security, said March 30.
As China’s population growth slows, it is also becoming more urban. City dwellers swelled to 665.6 million last year, more than twice the population of the U.S. China is close to having more residents in cities and towns than in villages for the first time in its history. The urban population makes up 49.7 percent of the total, 13.5 percentage points higher than a decade ago, the NBS said.
The one-child policy, which has resulted in millions of aborted female fetuses, has led to men making up 51.3 percent of the population, with 34 million more men than women. Most countries have more women than men, including the U.S., where 50.3 percent of the population was female in 2010, according to U.S. census data.
The census figures show that “we still face some contradictions and challenges in population, economic and social development,” including an aging population and an “unbalanced gender ratio,” Ma said.
China will eventually move to a two-child policy, the China Business News reported yesterday, citing an unidentified person close to policy makers. Farmers and national minorities can often have more than one child, and rich people can pay fines for having a second or third child.
Investors have overlooked the implications of changes in China’s population profile “because of the extreme focus on growth,” said Kirby Daley, a Hong Kong-based senior strategist with Newedge Group’s prime brokerage business. “The demographic issues cannot be avoided at this point. They are not reversible.”
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