Demographic security

China’s Struggle With Demographic Change

China’s rapid aging process is not only changing the makeup of society, but it is also dramatically impacting China’s future economic growth prospects and putting huge pressure on government finances.

In 1987, the early days of China’s economic miracle, 63.8 percent of the population were of working age, and 4.2 percent were aged above 65. That meant a surplus of workers to feed China’s low-cost manufacturing boom, which drove the average 10 percent GDP growth seen between 1987 and 2007.

But increased life expectancy and lower fertility means that by 2025, when the share of the 65-and-over population exceeds 14 percent China will officially become an “aged” society. But unlike France, which took 115 years for its share to rise from 7 percent to 14 percent, China will have taken 23 years, and much less than in the United States (60 years), United Kingdom (45 years), and Germany (40 years), according to research by the World Bank and Standard Chartered.

For the economy, this process will principally impact the labor market by reducing the supply of labor, with the work force expected to shrink from 911 million in 2015, to 848.9 million in 2020, and to 781.8 million in 2030, according to Deutsche Bank estimates.
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