Ever since the late 70s, China has been known as a
low-cost, high-growth phenomenon. Its economic transformation
began 30 years ago, as it emerged as a low-cost manufacturing
center. More recently, companies such as Internet equipment
maker Huawei have been competing with multinationals at higher
levels, as China looks to develop the intellectual capital of a
And with the economy growing at 9 percent, even in the
aftermath of the financial crisis, a middle class and consumer
culture is taking shape. While China has not crossed the
threshold from emerging to developed economy, it is getting
there very fast.
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All-China Research Team and read the profiles of the
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Chinas $6 trillion economy is not without its
challenges, though. Over the last year, it has grappled with
higher inflation and what many experts believe is a real estate
bubble in some markets. And despite the relative prosperity of
many urban regions, the country as a whole still has a low
per-capita income. The most fundamental and important hurdle
may be demographic, though.
Thanks to a slowing birthrate, mandated decades ago, by
Chinas one-child-per-family policy, Chinas
population is rapidly aging. While other countries, notably
Japan, are struggling with whether they will have enough
workers to support the older generations, the problem is
magnified by Chinas population of 1.3 billion, the
largest in the world. And since China is a key source of demand
for countless markets and industries around the world,
its ability to solve the problem in satisfactory way is
key to global growth.
Population growth in China over the last decade dropped to
0.57 annually, and the fertility rate of 1.5 percent is among
the lowest rates in the world, and well below the replacement
rate of 2.1 percent, the Washington Post said, citing data from
the Brookings Tsinghua Center for Public Policy in Beijing.
Over the same period, the number of people under 14 has fallen
by one third while the number of people over 60 has increased
by 20 percent, creating a scenario in which Chinas
population is expected to peak at 1.45 billion in 2029,
While Chinas economy is still on track to become the
largest in the world, other emerging markets might pace global
growth. India and Indonesia have younger populations and are
expected to grow much faster.
Over the next 20 years, Indias working age population
is expected to increase by 200 million; Chinas is
expected to grow by 4 million during that same period, and
decline by 51 million during the following decade, according to
Gerard Lyons, chief economist and head of research at Standard
And then theres Indonesia, where the average age is
28. Walking around Jakarta is almost shocking in
comparison to Japan. Adolescents and young adults are simply
everywhere. They jam the malls and restaurants, hang out in the
public squares, and fill the buses. One strains to see grey
hair, and usually succeeds only when a large family group is
present, says blogger Michael Auslin, of the American
Enterprise Institute. It is a type of society Japan can
but dimly remember, and one which even China will soon begin to
And when what?
An aging population may add to Chinas already
considerable inflationary pressures, some experts fear.
Businesses already are competing for labor, and wages rose 20
percent in China last year. "It will become harder for
productivity to keep up with faster wage growth, while the
consumption share of GDP should soon start to rise, reducing
economic overcapacity. All this points to higher structural
inflation pressure," Nomura analyst Sun Chi said in a report
cited by China Daily.
As Chinas surplus of cheap labor disappears, it may
start to focus more on the less labor intensive IT and service
businesses, competing more directly with counterparts in the
As the population peaks, so will Chinas demand for raw
materials, which has helped push the price of commodities ever
higher. The peak in demand will have an impact on many
industries. Chinas government claims it has so far
averted 400 million births due to the (one-child)
policy but that could represents a good amount of
potential demand for all types of commodities, not to mention
metals used in construction and automotive applications among
others, according to Metal Miner magazine.