China’s Aging Problem Will Be Much More Serious When Urbanization is Completed
In this open access article for China Leadership Monitor, Bruegel Senior Fellow Alicia García-Herrero presents findings related to her research on the relationship between China’s structural deceleration and demographic changes.
While declining fertility rate and increased life expectancy certainly puts pressure on the Chinese economy, they are currently offset by urbanisation trends in the country. Therefore, aging will not have a negative impact on growth until urbanisation is completed, which is estimated to happen around 2035. However, beyond 2035 this will not be the case as urbanisation will begin to reach its max. Consequently, beyond 2025 the rapid fall in labor supply will shave off 1.3 percentage points of growth each year. Nevertheless, rapid robotisation and artificial intelligence may mitigate the negative impact of aging in economic growth. Robotisation has been ratcheted up in China – as well as in Japan much earlier – but neither in Japan’s case nor in China’s have we so far seen productivity increase, on the contrary.
