Saturday, April 15, 2006

China's demographic uncertainties

Claus' post on the consequences China's economic and demographic issues is important. If the demographic statistics reflect reality, then China is destined to face these problems in these acute forms. The problem, as Andy Mukherjee went on to write in an article published by Bloomberg on 16 February of this year, is that they may well not.

Wolfgang Lutz, who runs the population-research program at the International Institute for Applied Systems Analysis in Laxenburg, Austria, is studying the range of uncertainty in China's future population trends. Lutz and his colleagues have identified at least 32 different estimates for the current fertility rate in Chinese women.

The official version is that each Chinese woman is giving birth to 1.2 children. Estimates compiled by Lutz show the actual number could be as high as 2.3 children. Such uncertainty in the Chinese data makes it difficult to say anything with confidence about the structure of the Chinese population in 2030 or 2050.

While the one-child norm is strictly enforced in urban areas with a carrot-and-stick policy, it has been less of a success in rural areas for cultural and economic reasons. In the late 1980s, the government started allowing rural couples to have a second child if their first-born was a girl.

Many girls in rural China are unregistered because their parents don't want to lose their chance to produce a male heir. The gender ratio is now close to 120 boys for 100 girls. Some of the imbalance may be real; another part may be a result of under- reporting female births.

The Lutz-coauthored paper "China’s uncertain demographic present and future" (PDF format) goes into more detail about China's future population prospects. As Wesley Ulm wrote in an essay on the topic, even before you account for the possibility that China's one-child policy is compromised by numerous exceptions based on social class, place of residence, the parents' family structures, and so on, China's population-control bureaucracy might well be hamstrung by the inability to micromanage hundreds of millions of families. Urban China may be relatively easy to control, especially given the presence there of the sort of development factors that tend to militate against high TFRs; rural China, much poorer and more neglected, is quite another.

What do Mukherjee, Lutz, and Ulm's arguments suggest? They don't contradict the very serious problems that China is going to face sooner or later. The TFR of ~1.8 children born per woman that Lutz seems to think most probable falls at the upper range of the likely TFRs raised in Claus' post, and Mukherjee and Ulm's suggestions about systematic undercounts in rural China can't be made to challenge the aging of the Chinese population. What they do suggest is that, on the basis of the statistical data most readily at hand, China might indeed be able to get rich before it grows especially old. It might not; but at this point, it's frustratingly still too early to say.


Anonymous said...

Fascinating post. Thanks.

China Law

Admin said...

I think both you and Claus raise important points. There are so many unknowns it is hard to get anything clear.

You are right to raise Wolfgang Lutz's work here, and the levels of uncertainty surrounding the evolution of China's demographic evolution.

I would simply make one point. Given China's scale, and the fact that by the time we arrive at the relevant critical points China will have (at least in size terms) the world's biggest economy, these problems won't only be problems for China, they will be global ones.

If China's internal market isn't functioning in a balanced way it will still be a huge machine for exportaing cheapest-cheap products, with an ever higher technical and intellectual content. So China's problems will rapidly become everyone's problems. That is why it is so important that we start to get this one right.

Randy McDonald said...

I agree. I'm uncomfortable about the idea of having to improvise on matters of such importance with such uncertain data. :-\

Anonymous said...

The age prfile of China in 2025 would only be comprobal to the EU in the mid 1980's. That said ageing is not likely to slow the economy down before 2050 even if there is afemale reporduction rate of 1.2 children. In a poor (per capita country) like China population can mor eeasily be raised by the Government - free housing for all families with 6 or more children - for one idea off the top of my head - alla - old soviet states.

China will remain export driven, if the students I teach at University are a good guage. Add to this India with it expansion into services and IT, the pressures on the US, EU and Australia will be intense. Intra Asian trade is already double Asia _ US, when the ASEAN free trade agreement of 2012 starts the West maybe sidelined.

Sorry to say that it may be back to the past when Asia was the dominant wealth creator in the world. I must admit that this is nothing we should fear, as a Brit living in Australia give me thhe democracy model anytime.

We are rich, have the rule of law and have democratic rights. I have a job (OK casual, but I have been at the university for five years and expect to still be here to retirement). I have a good, car, wife and kids (not loved inthat order!). Consume less, save more and work hard. My car is five years old and will do another 15 years, nothing is replaced until it breaks . My investment is in ongoing post grad studies and my family, the former to help me earn more for the latter. A few years ago an retiring lecturer said to me I bought a house near the university, let out downstairs to students and walked to work to save on a car. The married a lodging post gard and when she qualified we both walked to work and later let out downstairs to pay for childrens private school. He retired to own four or five houses.

I let a unit behind my house out to Overseas students they pay my mortgage. We have a rental house more overseas students rent that and pay my other mortgage on that. I get extra cash for English classes. When they have paid off the loans I will put their rent into stocks, these will be more firms investing and doing business in Asia. City Bank is buying hotel in Japan, I at not so rich so I am investing in well run Australian Prioperty Trusts investing in Japan. HSBC, Standard Charter, BHP Billiton and so ride the inevitable wave. Have double my money this last two years and as you may guess am using an eight year old computer and think flat screens are a waste of money - rather have a cathod ray tube and $2,000 of stock.