China's Looming Demographic Problem Moves Steadily Up Over The Radar

As Israeli blogger "Nobody" points out for us,the Economist has been giving increasing coverage to global demographic issues of late, and this week it is China's problem that has caught their eye.



As the Economist point out, the impact of so many years of one child per family policy is going to be significant, and while changing it now will be too late to avoid short term damage, in the longer term such a change is essential, if the country ever wants to return to some kind of structural stability.

SINCE the 1970s China’s birth rate has plummeted while the number of elderly people has risen only gradually. As a result its “dependency ratio”—the proportion of dependents to people at work—is low. This has helped to fuel China’s prodigious growth. But this “demographic dividend” will peak in 2010. China’s one-child policy will keep birth rates low, but as life expectancy continues to increase, so will the dependency ratio, reducing the country’s potential for growth. The government could yet salvage the situation by loosening its one-child policy. More children would increase the dependency ratio until they were old enough to join the workforce, but reduce labour shortages in the long term.

Again, no one really knows what the present Chinese TFR actually is. The US census bureau have just revised down their estimate to 1.5 from 1.8, but many internal studies put it at nearer 1.3, which, if accurate, is bound to produce a major structural distortion in the population pyramid. The economic consequences - for the whole planet - are also bound to be significant, as "Nobody" points out:

Meanwhile, given the general propensity of China to rapid economic growth and no less dramatic deceleration of its population growth (the workforce will stop growing pretty soon actually), the next superpower is about to transform itself into a huge vacuum machine sucking off labor surpluses from around the globe. Inside China labor shortages will develop and wages shoot up pushing labor intensive industries out of China and generating demand for these products from outside China. In short, after a decade or something, the global economy, and even more so the economies of the third world, may get a friendly push forward from the world's next superpower, and a very massive one on that occasion.

What China's demographic deficit has in store for all of us a decade or so from now is actually far from clear, but one thing is certain, it will be a roller coaster ride. Get ready to fasten your seatbelts.

Update

Quite coincidentally, a new blog was born yesterday - the anarchist banker - written by a young Portuguese economist who is a unabashed fan of Fernando Pessoa. His first post reviews a paper - The End of Chimerica - written by Niall Ferguson and Moritz Schularick.

For the better part of the past decade, the world economy has been dominated by a world economic order that combined Chinese export-led development with US overconsumption. The financial crisis of 2007-2009 likely marks the beginning of the end of the Chimerican relationship. In this paper we look at this era as economic historians, trying to set events in a longer-term perspective. In some ways China's economic model in the decade 1998-2007 was similar to the one adopted by West Germany and Japan after World War II. Trade surpluses with the U.S. played a major role in propelling growth. But there were two key differences. First, the scale of Chinese currency intervention was without precedent, as were the resulting distortions of the world economy. Second, the Chinese have so far resisted the kind of currency appreciation to which West Germany and Japan consented. We conclude that Chimerica cannot persist for much longer in its present form. As in the 1970s, sizeable changes in exchange rates are needed to rebalance the world economy. A continuation of Chimerica at a time of dollar devaluation would give rise to new and dangerous distortions in the global economy.

I would just note in passing that the China-United States nexus was not the only export-lead/excess consumption duet we just left behind, there was the Sweden-Baltics/Ukraine one, the Germany-Southern Europe one, and the Japan-RoW one (rest of the world). As we wave bye-bye to one era, it is just worth noting than we don't seem to have a very clear idea of what the one which lies ahead may look like.

Anyway, thanks to the anarchist banker blogger for drawing this all to our attention. As the author himself admits, posting may be infrequent (anarchic?), but they should always be worth the read.

Malaysia's relatively declining Chinese and South Korea's interracial children

Here's two follow-up posts, each looking at Malaysia's changing ethnic demographics and South Korea's unexpected new melting pot.

Over at the Malaysia Insider, Helen Ang examines ("Honey, I Shrunk the Chinese!") the relative decline of Malaysia's Chinese from a plurality to an increasingly small minority. She emphasizes the extent to which emigration from Malaysia has been concentrated among ethnic Chinese, but considers the demographic transition only inasmuch as it reflects the moral decay of younger Malaysian Chinese relative to their elders and their lamentable lack of ethnic versus regional identity.

The New York Times' Martin Fackler suggests ("Baby Boom of Mixed Children Tests South Korea") that, owing to discrimination against non-Koreans, language issues, immigrant women's lack of agency, and the concentration of immigrant women in relatively deprived areas and social strata, children born in South Korea to couples of mixed nationality are expected to face a hard time of it despite their country's need for young people.

On Kiribati and climate change and island nation migration

Kiribati, a collection of very low-lying islands in Micronesia almost absurdly vulnerable to climate change and rising sea levels has just announced how it intends to make sure its citizens can find refuge: they'll all become professionals.

In one of the most emotional sessions so far of the Copenhagen climate meeting, officials of the remote atoll nation said Wednesday they are doing everything possible to preserve their low-lying country, which faces inundation and loss of its fresh water to sea level rise.

They appealed to negotiators and world leaders at Copenhagen to reach an effective new global pact to limit carbon emissions, calling it their last hope of saving their homeland.

In Kiribati, climate change and sea level rise "are no longer a matter of speculation. They are a reality for our people," said President Anote Tong, in a videotaped address that showed footage of stands of salt-killed palm trees and waves crashing onto highways and lapping into homes.

But island officials also admitted they are making plans for an eventual "practical and rational" relocation of the atoll's 96,000 people to countries including Australia and New Zealand.

"We are proud people. We would like to relocate on merit and with dignity," said Tessie Lambourne, Kiribati's foreign secretary.

Under the plan, islanders are taking advantage of assistance programs in Australia and New Zealand to train young people as nurses and other in-demand professions. The programs allow successful graduates to remain and seek citizenship.

The hope, Lambourne said, is that the families of immigrants could eventually qualify for immigration as well.

She said she hoped similar training and migration programs would be established in other Western nations, including the United States, Canada and Japan.

"The idea is to have pockets of (Kiribati) communities around the world," she said.

Whether this ambitious plan can be actually realized or not, given the limited financial and other resources of Kiribati, is open to question, although upcoming global skills shortages and workplace shrinking will act in the island nation's favour. While the numbers involved are significantly smaller than, say, the shift of West Africans from the region's interior to the more hospitable coasts that I blogged about in June, the absolute numbers are still significant. Entire countries are vulnerable, nto only to disappearing to to first become uninhabitable.

Long-term climate change, including the increasing frequency and severity of extreme events such as heat waves, high rainfall intensity events, summer droughts, tropical cyclones, windstorms, storm surges, and El-Nino-like conditions are affecting the lives and livelihoods of people in PICs. Coupled with overexploitation of resources, increasing urbanization and population increase, the compounding effect has caused considerable and widespread damage and threatens development in the region. For the low lying atolls, the likely economic disruption could be catastrophic, even to the extent of requiring population relocation into other islands or adding numbers to the Pacific Diaspora, with the subsequent social and cultural disruption having unknown proportions. Failure to reduce vulnerability could also result in loss of opportunities to manage risks in the future when the impacts may be greater and time to consider options limited.

Today, roughly 1 million people live on coral islands worldwide, and many more millions live on low-lying real estate vulnerable to the rising waves. At risk are not just people, but unique human cultures, born and bred in watery isolation. Faced with inundation, some of these people are beginning to envision the wholesale abandonment of their nations. These islands could be rendered uninhabitable by other effects of climate change. Floods and rogue waves raise the saltwater table underlying the atolls, poisoning the staple crops of our atoll societies. Already some farmers have been forced to grow their taro in tin containers, and already some of the smaller islands in the atolls have lost their coconut palms to saltwater intrusion.