China Will Feel the Brunt of This Demographic Shift

Jimmy Rogers (I’ve met him once – a nice guy) tends toward the sensational. There is a grain of truth in what he says, but the demographic situation in China is worse than that in Japan, which is why the Communist leadership there is considering eliminating the one-child policy:

I gave a talk last October, which included a lot on the effects of demographics on the global economy:

http://alephblog.com/society-of-actuaries-presentation/ (pages 15-23) (non-PDF versions have my lecture notes)

Now, eliminating the one-child policy won’t do that much, because most non-religious women in China don’t want to have kids. In developed societies, once women don’t want children or marriage, no level of economic incentive succeeds in changing their minds.

This isn’t meant to be social commentary. The point is that there is a global demographic shift of massive proportions happening where there will be huge social pressures on retirement/eldercare systems, because the ratio of workers to retirees will fall globally. China will be affected more than most, and the U.S. less than most (if we can straighten out Medicare).

The economic effect will feel a little stagflationary, with wage rates improving in nominal terms, taxes rising to cover transfer payments, and assets being sold (to whom?) to fund retirements and healthcare. There need not be a crisis, like a war over resources, in all of this, but it won’t be an easy next 30 years. One thing for certain, when you look at labor, capital, and resources at present, the scarcest of all is resources. Again, resource price inflation. At present, capital is scarcer than labor, but that will flip in the next 30 years.

Comments

[Optima]

It is totally not ture that most non-religious women in China don't want to have kids. I don't know where you get it. Have you been to China and met ordinary chineses women, not the Shanghainight club girls? For your reference, even the most educated chinese women, here in US, with MS and Ph.D's have at least one or two kids. In China, the fimaly is still very strong. Young people may have kids later than before, but they will have fimaly and kids. That's the first thing about chinese. If you don't even understand this, stay away from anything related to China.

[Ehp246]

"Women Do not want children"? Thank god I can do my own research.

[huangjin]

I think is he just using a bit of hyperbole when he says most women don't want to have kids. But he's close to the mark. I met people in their 40s who said they had one child for their parents to have a grandchild; if it were up to them they would have none. I had the distinct sense when speaking with university educated younger people that if the one child policy was lifted, fertility rates would not move significantly higher. Material wealth and self-actualization are competing with children now, and as with Europe, Japan, Korea, and parts of the U.S., people are choosing to have fewer children.

[semuren]

While I normally like your posts Optima is correct here and the idea that "non-religious women in China don't want to have kids" is nuts. Certainly, as women become wealthier, more educated and more urban ideal family size tends to drop, but that is not the same as not wanting to have kids. What is more, there is still quite a bit of pressure to have a son, even among the wealthy urbanites. We can see this in the fact that some groups are allowed to have a second child only if the first child was a girl! While the propensity of girls to send money back to the rural family from factory jobs (and that of boys to drink, gamble and whore it away) has made female children's status somewhat better in the eyes of rural Chinese, the need to produce a son in rural families is still truly compelling. People run from their homes and face fines, persecution and all manner of hardships so that they can have a son. And there many, many, many unregistered second and third children all over the country. Just downstairs at the little barbershop near my building the (migrant) owners have two or three daughters, but their youngest is a son. The dependency ratio in China is going to be a problem, but as Mike Pettis pointed out recently (linked in the article above) eliminating or further relaxing the one-child policy might make it worse in the short run.

[kkin365]

"Most non-religious women in China do not want to have children"? This poster, who showed up in China to give a talk, has, probably stayed there for just a day or two, and now claims that he is an expert on Chinese demography. What a joke.

[huangthomas]

Culture, economy, education play important role in deciding the size of a family in China. Religion plays little role. The wording of "non-religious&qu... is a poor choice. Most Chinese has religion, Buddhism, Taoism, Christian, Catholic, Muslim.....etc. , although they are discouraged to warship in non-government sponsored or approved premises.
Economy plays major role, because most people could not afford to have more than two children. Imagine the government only provide 6-year of free elementary education, then you are on your own. There is no universal health insurance and health care and higher education are very expensive. Average family spend 50% of their income on foods.
Even if the government lift the one child policy, the number of children a couple may have probably will increase from 1.0 to 1.8. I doubt it is going to go over 2.0. Therefore, the population size will keep shrinking. This is consistent with all developing countries in East Asia.

China is lucky not to have a social security system designed to use younger generation to support the older generation. It is a defined contribution system and I hope the government will have enough wealth to support a satisfactory safety net. For example, if you live in Taiwan and age over 65, you are entitle to monthly living support from public of $100. With PPP (purchasing power parity) adjustment, it worth approximately $250 in purchasing power. If the elderly has a place to live, with national health insurance throw in, they are OK.

Remind you China has budget surplus and a foreign currency reserve of 1.4 trillion and growing. Do not extrapolate our current difficulties to China. China is China, she is not USA