Transcript Lecture 7d -- Demographic Dividend in China

China’s Demographic Dividend
The possible benefits of
TEMPORARY Population Growth
Spurt
What drives China’s Growth?
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•
•
•
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Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization
Reform and Restructuring
From Communist to Socialist with Chinese Characteristics
From Central Planning to Market Driven Economy
From Closed-Door policy to Open-Door Policy
From Dictatorship to “Centralized Democratic” Decision Making
Privatization
What Drives China’s Growth?
•
•
•
•
•
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization
What Drive China’s Growth?
Urbanization
-- 1.5 million per month
Industrialization
-- Raise productivity
-- Monetize economic
activities
Urban / Total Population
(%)
2000
2005
2010
2015
2020
2025
2030
Australia
87.2
88.2
89.1
89.9
90.6
91.3
91.9
China
35.8
40.4
44.9
49.2
53.2
56.9
60.3
Hong Kong
100
100
100
100
100
100
100
India
27.7
28.7
30.1
31.9
34.3
37.2
40.6
Indonesia
42.0
48.1
53.7
58.5
62.6
65.9
68.9
Japan
65.2
66.0
66.8
68.0
69.4
71.1
73
Korea
79.6
80.8
81.9
83.1
84.2
85.2
86.3
Malaysia
62.0
67.6
72.2
75.7
78.5
80.5
82.2
Pakistan
33.2
34.9
37.0
39.7
42.8
46.3
49.8
Philippines
58.5
62.7
66.4
69.6
72.3
74.6
76.7
Singapore
100
100
100
100
100
100
100
Thailand
31.1
32.3
34.0
36.2
38.9
42.2
45.8
Vietnam
24.3
26.4
28.8
31.6
34.7
38.1
41.8
Asia
37.1
39.7
42.5
45.3
48.1
51.1
54.1
US
79.1
80.8
82.3
83.7
84.9
86.0
87.0
Latin America
75.3
77.5
79.4
80.9
82.3
83.5
84.6
Western Europe
75.3
76.1
77.0
78.0
79.1
80.4
81.7
Source: United Nations, CLSA Asia-Pacific Markets
http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?_r=0
http://www.nytimes.com/video/world/asia/100000002279849/in-china-astaggering-migration.html
What Drives China’s Growth?
•
•
•
•
•
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization
What Drives China’s Growth?
•
•
•
•
•
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization
Background this and next 3 slides
The demographic dividend
Explained in 4 parts
Part 1: Preliminary Steps
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Country enters stage 2 of Demographic Transition
Results in large increase of children
Dependency ratio increases
Little to no change in elderly population life expectancy
Part 2: Window of opportunity opens
Mechanics of situation
•Country enters stage 3 of Demo. Trans.
•Children decline as proportion of population (see diagram)
•Dependency Ratio declines
•Little to no change in elderly proportion
Worker bulge appears (see diagram)
Wise Country follows pro-development policies
•Moves to creates Employment opportunities
•Pursues international export strategy
Part 3 Dividend Period
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For about a generation the country rapidly grows and prospers
Workers support fewer dependents and tend to invest their growing surplus
Country’s policies insure ample employment, investment opportunities, and
greater consumption
Part 4 Window closes – but country developed
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After a generation workers age and begin to retire
Stage 4 of Demographic transition entered
Dependency ratio climbs based mainly on elderly (see diagram)
As Dividend ends
Growth of economy slows but continues
Countries at various parts of the Demographic Dividend
The demographic dividend in
words
The demographic dividend is a window of
opportunity in the development of a society passing
through the demographi transition that opens up as
fertility rates decline when faster (super charged)
rates of economic growth and human development
are possible when combined with effective policies
and markets. The drop in fertility rates often follows
significant reductions in child and infant mortality
rates, as well as an increase in average life
expectancy.
The demographic dividend in
words
The demographic dividend is a window of
opportunity
1.fertility rates decline due to economic growth
2.Demographic transition heads into stage 3 and
eventually stage 4
3.Super charged development possible when
increased labor combined with effective policies
and markets.
4.The drop in fertility rates follows reduced child/
infant mortality rates,
5.and increase in average life expectancy.
As women and families realize that fewer children will
die during infancy or childhood they will begin to have
fewer children to reach their desired number of
offspring. However, this drop in fertility rates is not
immediate. The lag between produces a generational
population bulge that surges through society. At first
for a period of time this “bulge” is a burden on society
and increases the dependency ratio (more kids).
Eventually this group begins to enter the productive
labor force. With fertility rates continuing to fall
(headed towards stage 4 of Demo. Trans.) and older
generations having shorter life expectancies, the
dependency ratio declines dramatically.
This demographic shift initiates the demographic dividend.
With fewer younger dependents, due to declining fertility
and child mortality rates, and fewer older dependents, due
to the older generations having shorter life expectancies, and
the largest segment of the population of productive working
age, the dependency ratio declines dramatically leading to
the demographic dividend. Combined with effective public
policies this time period of the demographic dividend can
help facilitate more rapid economic growth and puts less
strain on families. This is also a time period when many
women enter the labor force for the first time.[1] In many
countries this time period has led to increasingly smaller
families, rising income, and rising life expectancy rates.[2]
However, dramatic social changes can also occur during this
time, such as increasing divorce rates, postponement of
marriage, and single-person households.[3]
China: End of Demographic
Dividend
China’s Case
One Child
Policy
More
Kids Dip
More Elderly
Following Japan & China
Peak Years of “Cheap”
Workers
“Scissors” crisis of aging
What’s
happening
here?
Dependency Ratio
Old
Kids
Replace Brawn with Brains?
Demography and Education
Demography Dividend
College Enrollment
mn
7.0
6.0
5.0
2.0
1.0
New ly enrolled
Fresh graduates
2010
2007
2004
2001
1998
1995
1992
1989
1986
0.0
1983
With money, Will spend
3.0
1980
Young and Educated
4.0
1977
China’s Baby-boomer
Generation
Brain power: US vs China
35,000
Science and engineering PhDs
(No.)
USA
30,000
China
25,000
20,000
15,000
10,000
5,000
0
1999
2000
2001
2002
2003
2004
2005
Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets
2006
2007
What Drives China’s Growth?
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•
•
•
•
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization
Saving is Virtue!
Total Household Deposit in China
US$5.13 Trillion
Total Deposit
Waiting to make deposit
Household Savings / Disposable
Income
China
Singapore
Hong Kong
India
Higher Savings Ratio,
Malaysia
South Korea
Higher Capital Formation,
Indonesia
Thailand
Higher Growth Rate
Australia
Taiwan
Japan
Philippines
(%)
USA
0
10
20
Source: Euromonitor, CLSA Asia-Pacific Markets
30
40
What Drives China’s Growth?
•
•
•
•
•
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization
Globalization
China Accounts for 10% of Global Trade
Drivers for the Growth in Next
Decade?
• Reform and Restructuring should continue,
but no more low hanging fruits
• Urbanization and Industrialization
another two decades to go
• Demography Dividend and Education
no more labor growth, productivity to go higher
• Savings and Capital Formation
need less savings to drive domestic consumption
• Globalization
slower export growth, trade balance
GDP grow th
2026
2024
2022
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
No More Double Digit Growth
%
16
14
12
10
8
6
4
2
0
But, Power of Compounding
GDP Comparison
30000
US$ Billion
25000
20000
China
15000
US
India
10000
5000
0
Year
Key Assumption
China
India
U.S.
Real GDP
7%
6%
2%
Inflation
3%
4%
2%
Currency Appreciation
2%
1%
Uneven Spatial Development