On the coast of the Yellow Sea, near the murky waters of the Yangtze River flowing into the East China Sea, lies a quiet rural area called Rudong County in east China's Jiangsu Province.
The county cannot disguise its old age, which appears at first sight when walking its semi-deserted streets, bereft of young faces while the familiar faces of old men working in the fields, in sales jobs in the shops, and even in taxis drive.
A city that looks like it has "for the elderly only" written on its door.
In one area, a building appears that looks like a university, and when approaching, dozens of elderly women appear, their long-lived grooves are dug in their faces, they gather together to perform Beethoven’s Ninth Symphony using the Chinese “hulusi” flute, as part of the weekly music lesson at the University of the Elderly, which includes 570 students, most of whom exceeded At the age of 70, so is the university, which is funded by the Chinese government with the aim of tutoring seniors in just about everything from the steps of Latin dance, literature and painting to how to use smartphones.
The economy of the old province of Rodong, which has about a million people, more than a third of whom are over 60, is suffering from a shortage of labor, as companies struggle to find employees, while retirement homes are filled to meet the needs of the elderly, while high schools close their doors due to the shortage of young people. Social services are suffering due to the increasing number of older persons who are placing enormous pressure on them (1).
"Rodong" is not an innovation from other Chinese provinces, although it was the first experiment laboratory for the one-child policy, since the Chinese authorities introduced very harsh family planning systems to the province in the 1960s, that is, nearly two decades before the policy was generalized to the rest of China's provinces and territories, it is an image The future of what will be the situation in all of China soon, so that the second economy in the world faces an aging crisis that was not taken into account, a crisis that may have the ability to bring about a radical change in the Chinese economic, social and political landscape completely.
Back in the middle of the twentieth century, the population of China was growing at a rapid pace in the peace years after long suffering with the consequences of the Sino-Japanese Wars and the severe Chinese Civil War in the 1930s and 1940s, with an average population growth rate of 20% annually in the period from 1950 to 1978, the period in which the Chinese government shifted its development strategy from a planned economy to a market-based economy, and out of fear of the consequences of that rapid population increase, so that economic reforms would not increase people's incentives to have more children, China launched the famous slogan " Later, longer, and fewer, which means: “later marriage, a longer period of time between births, and fewer children” (2).
Poster for a campaign for late marriage
Poster titled "Less Births, Better Births, To Grow Stronger China"
The Chinese government was by no means willing to allow its economic plans to be spoiled, so when its decade-long efforts failed to persuade people to have fewer children, it decided to start taking draconian measures to control the population, adopting a rigorously controversial one-child policy in 1979. The government issued strict instructions to Chinese couples to have only one child. The penalty for breaking the instructions was the government withholding welfare benefits from him, and imposing financial penalties, and more harshly;
The government conducted forced abortions and sterilization for lawbreakers (3).
Of course, it is possible to imagine what happened after that, as China witnessed a rapid decline in the fertility rate unprecedented in history, as the rate decreased from 5.8 children per woman in 1970 to 2.8 children in 1979, to reach only 1.5 children in 2010 (4), meaning that Every two women have only three children in their lifetime.
This decline in the birth rate coincided with government policies that facilitate access to medical care, which led to the improvement of many health indicators.
Thanks mainly to Mao Zedong's famous "Barefoot doctors" programme, which trained hundreds of thousands of young Chinese villagers and farmers to provide basic medical care and focus on prevention rather than cure, at affordable prices to rural China (5), Health care is greatly improved in rural areas, and thus life expectancy in China has increased from 43 years in 1960 to 76 years in 2015 (6).
Mao Zedong's Famous "Barefoot Doctors" Program
The one-child policy was not the only reason for reducing the number of births. As a result of the rapid and astonishing economic expansion, the growth rate of China's GDP increased by miracle rates, amounting to more than 9%, over three decades, and thus led to the industrial revolution that brought With it an urban transformation, as the demand for urban jobs increased and women's job opportunities improved, and consequently, delaying marriage or delaying childbearing for later years. Economic development and the subsequent urbanization have also brought an increase in the number of smokers, consumers of alcohol and unhealthy diets, and consequently, the incidence of blood pressure diseases among the population, and high rates of pollution, all of which had a direct impact on fertility, whether for men or women. In confirmation of the previous result, the results of a study (7) entitled “The Impact of Urbanization on China’s Fertility” showed, treating the period 1982-2008, found that urbanization was responsible for 22% of the decline in China's total fertility rate in that period, especially after 2001 onwards.
The result is that not only is China aging, but it is aging faster than anywhere in the world. According to the United Nations, China is aging today faster than almost any country in the modern era, and its dependency ratio could rise to 44% by 2050(8), which means that this percentage of the population does not work and lives off the earnings of the rest of the working population, which is a percentage Of course, the lion's share of it will be for the elderly, followed by those who suffer from unemployment among the youth.
The signs of the deadly demographic crisis began in China nearly a decade ago, and its impact intensified year after year. In August 2017, the Chinese Ministry of Civil Affairs issued a report predicting the extent of the crisis, confirming that the country had about 230 million people aged 60 years and over at the end of 2016, or 16.7% of the total population (9). To put it into perspective, the number of elderly women in China is now more than twice the number of Egypt's population of more than 100 million, according to the statistics of 2018, and compared to global standards, the United Nations considers any country an "old society" when the number of people aged 60 years or more to 10% or more of its total population.
The following figure shows the expected decrease in the number of people of working age to only 700 million people in 2050 compared to 925 million people in 2011. In contrast, 500 million people will reach 60 years of age or older, according to the Chinese Ministry of Human Resources and Social Security (10).
In addition to the fact that China is aging the fastest in the world, there is another problem that complicates it more than the rest of the world, which is that China is one of the few countries where old people rarely become wealthy or at least moderately rich.
While 60% of the world's aging countries reached the graying threshold when the per capita GDP exceeded $10,000, China officially became an old country when the per capita GDP was less than a thousand dollars, which means that there are more financial constraints When it comes to any potential solutions (11).
The problem remains a constant concern in a country whose development is linked to its demographic advantages. Over the decades, China has reaped the fruits of demographic growth in the form of a young labor force for its industrial sector, enabling it to emerge as a global economic power.
But that power is now threatened by the large number of old people who were born in the 1950s and 1960s before the overpopulation spigot was turned off in the 1970s.
Perhaps the Chinese advance towards Africa explains what China has begun to suffer painfully from now, which is the lack of labor and its high costs at home, so it launched the Go Out policy during the first decade of this century to encourage Chinese companies to invest abroad, especially in Africa(12).
In fact, Chinese companies did not need government guidance, as rising labor costs due to lack of manpower was sufficient reason to push companies out of China.
Professor Kai Fang, a Chinese labor economist, estimates that the rapid decline in the labor force will reduce China's annual growth rate by 2.5 percentage points from 2016 to 2020, and that the annual growth rate will be 5.01% from 2013 to 2023, The percentage will drop to 3.2% from 2023 to 2033(13). China's demographic dividend, which is the country's rapid economic growth in the past three decades that was primarily driven by exports and relied on a sea of abundant and cheap labor supplies, will end. The rapid decline of the labor force will cause a rapid increase in wages and thus weaken the competitiveness of Chinese industries. in the global market, which affects economic growth.
Economists know well the ferocious phenomenon plaguing developing countries, the labor shortage accompanied by rising wages, as the Lewis turning point.
It is expected that China will reach the Lewis tipping point before 2030 (14), so that one labor recruitment company in China predicted that by that year, China would start hiring workers from abroad to overcome the problem of labor shortage (15).
Getting to that point will have other, no less important effects.
In earlier times, with the working population growing faster than the total number of Chinese, production always exceeded consumption, creating pressure on the Chinese system to manage its trade surplus. Over the next few decades, by contrast, the labor force would shrink faster than The total population, which means that consumption must exceed production (16), and this would limit the flood of Chinese products destined for the world.
Aging leaves the body of the Chinese economy, therefore, with many wounds that the Chinese government is trying to heal, and one of the most painful of these wounds is the depletion of the resources of pension funds by the elderly, as the Chinese government is under great pressure because the funds of the provincial pension funds are running out quickly, while the elderly are putting pressure on the Chinese social security system. This fact is confirmed by a report of the Chinese Academy of Social Sciences that nearly half of the pension funds in Chinese provinces are facing a deficit, while the excessive burden is placed on the young labor force to support the elderly, noting that the problem is serious, especially in the provinces of “Heilongjiang”, “Jilin” and “Liaoning” In the northeast of the country, where the proportion of the elderly in the labor force is rising steadily.
The rapid aging of the population in the world's most populous country means that pension contributions by current workers will no longer be sufficient to meet the retirement demands of the elderly, forcing the government to fill that gap since at least 2014, constituting a shortage of pension funds in China is now a chronic headache for Chinese President Xi Jinping, as this inability is hampering Peng's efforts to stem the rampant growth of Chinese state corporate debt.
The extent of that headache can be known simply by knowing that retirement expenses rose by 11.6% between 2014 and 2016 to reach $410 billion (17). The biggest problem with the financing of pension funds here is that the amount of deficit covered by the Chinese government comes from taxes, and the bad news comes that the high dependency ratio or people who do not work due to the high levels of transition to old age will lead to a decrease in the tax proceeds due to the decrease in the number of taxpayers (18). Consequently, the government's ability to cover the amount of the deficit, as well as the financing of medical aid, which the elderly consume the largest part of, is weak.
In an interview with Bloomberg, James Liang, founder and president of China's largest online travel company Ctrip, adds a darker dimension to China's aging crisis. Liang, Ph.D. in economics from Stanford University, says that aging in China puts barriers to things like innovation and entrepreneurship, while "innovation is the vital competitive factor for major economies in the future" (19).
Liang stresses that innovation and entrepreneurship are especially associated with a young labor force. A workforce made up mostly of 50-year-olds is very different from a group made up mostly of 20 to 30-year-olds, and although the dependency ratio is the same , the age mix in the workforce is an important factor, and when there is a large pool of talent from multiple industries in the same near field; This generates a lot of efficiencies, because the innovation process is very dynamic and deep.
Apparently, the Chinese government realized the predicament facing the Chinese economy now, so it immediately eased since 2013 the supervision of the one-child policy until it abolished it in late 2015, after 36 years of operation, to allow the birth of two children per family.
However, the results have been disappointing, as the government is now considering a complete abolition of the controversial childbearing policy, and even financial incentives to encourage births, and even counties have already begun arrangements to award special bonuses for new children (20).
Based on the above, the aging crisis in China could be the Achilles heel that is taking the giant economy to its death, due to the one-child policy and other harsh policies implemented by the Chinese government during the second half of the last decade, policies that decision-makers in China might like if they returned Time machine backwards to open the tap population to the end.
Today, the Chinese government is chanting the exact opposite of what it did four decades ago, but slogans such as “Please have another baby” may not resonate with the Chinese because of the high cost of living, long working hours and high childcare expenses, which in turn may not resonate with the Chinese. The government, which places strict restrictions on foreign workers, is pushing companies to automate and robots(21), and a quick look at the factories of southern China's Pearl River Delta, the hub of Chinese exports across the border with Hong Kong, may reveal the scale of the profound changes taking place. Inside the country with the largest population density on earth, which today is graying faster than everyone thinks.
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Sources
China's answer to its ageing crisis?
A university for 70somethings
Earlier, shorter, but fewer: fertility transition in a North China village
China suffers aging population nearly 40 years after introduction of one-child policy
Population, Policy, and Politics: How Will History Judge China's One-Child Policy?
China's village doctors take great strides
life expectancy at birth in China
The Effect of Urbanization on China's Fertility
World Population Aging 2015
China's elderly population exceeds 230m
Authorities working on plan to delay retirements
Aging China: Changes and challenges
China 'Going Out' 2.0: Dawn of a New Era for Chinese Investment Abroad
China's Economic Growth Prospects: From Demographic Dividend To Reform Dividend
The End of Cheap Labor
China's Achilles heel
China's Rapidly Aging Population
China's Next Debt Bomb Is an Aging Population
Implications of Population Aging for Economic Growth
China's Aging Population Bad for Innovation, Says Ctrip's Liang
China's Aging Problem Is a Serious Threat to Growth
China's Two-Child Policy