Beijing, 5 May (ZXS) -- Does China need to worry about losing its title of "the world's most populous country"?

——Interview with Cai Fang, chief expert of the National High-end Think Tank of the Chinese Academy of Social Sciences

China News Agency reporter Wang Enbo

According to the United Nations world population projections, India became the world's most populous country in April this year. At the same time, China has entered a negative population growth track.

The development of Chinese is facing new situations and challenges, but Cai Fang, chief expert of the National High-end Think Tank of the Chinese Academy of Social Sciences and member of the Faculty of Sciences, pointed out in his new book "The Era of Negative Population Growth: Challenges and Opportunities for China's Economic Growth" that this is also an opportunity for the emergence of reform dividends. Losing the title of "world's most populous country", does China need to worry? How can China continue to tap the momentum of economic growth from its huge stock of population? The China News Agency's "East-West Question" recently interviewed Cai Fang on this.

The following is a summary of the interview:

China News Agency: Some people believe that after China loses its title of "the world's most populous country", it may affect economic development in the long run. Does China need to worry about this?

Cai Fang: "The world's most populous country" is now just a symbolic title, not important. Historically, in the "Malthusian era" before the Industrial Revolution, China and India alternately led in terms of total populations. During this period, living standards were low in all countries of the world, at all times and places, and a large population meant more total income and, to some extent, more creativity. At that time, ideas came from direct experience, so populous countries had the opportunity to be at the forefront of science and technology and become economic powers. But everything has changed since the Industrial Revolution, especially now that new technologies have broken the boundaries of old resources. For example, in the past, factors of production included land, labor, capital, technology, etc., and now data has also become a factor of production. New factors of production are far more renewable and sustainable than traditional ones.

At the prosperous plant of China's FAW Hongqi Manufacturing Center in Changchun, Jilin, a fully automatic robotic arm assembles tires. Intelligent, automated, and unmanned have become the trend of production and life development. Photo by Zhang Yao

Therefore, the performance of economic growth will be affected by demographic transition factors, positive or negative, but changes in demographic trends are not fate or limits, and should not be the ultimate determinant of economic growth. Any country, no matter what stage of demographic transition, in the given internal and external economic environment, as long as it has appropriate economic systems and mechanisms, sufficient to fully mobilize resources and factors, and effectively allocate resources and factors, can overcome adverse demographic factors interference and achieve good economic growth performance.

China News Agency: In 2022, the total number of Chinese has shown negative growth. China's economic growth has benefited from the demographic dividend for a long time, how will this dividend evolve in the future?

Cai Fang: Compared with many developing countries, including India, China's experience during the period of rapid growth shows that no matter what the demographic pattern is, whether it is to reap the demographic dividend or overcome the demographic resistance, it needs to rely on a series of other conditions, including the incentive level of the economic system, the overall education level of the labor force, the market-oriented level of resource allocation, the level of opening up to the outside world and the level of sharing of economic development. Without the necessary conditions for these developments, population becomes a burden and is not translated into dividends for accelerated economic growth.

On February 2023, 2, the Beijing College Student Employment and Entrepreneurship Guidance Center under the Beijing Municipal Education Commission ushered in the first offline double election meeting of spring, and applicants waited in line to submit their resumes to employers. Photo by Tomita

As a populous country, India has actually had a potential demographic dividend in the past, but a major constraint to its development is the low number of years of education in the labor force. India's indicator is not only significantly lower than China, but also lower than many other developing countries in the world, which makes its manufacturing industry not fully developed. Although its outsourcing service industry has since developed, and some people have higher education, it is not large enough. Therefore, from the perspective of demographic dividend, when the quantitative advantage of labor force weakens, it is more important for China to increase investment in education in the future to improve the quality of labor and cultivate talent dividends.

China News Agency: China still has a huge population of more than 14.<> billion people, what measures can be taken to further tap the economic growth potential from it?

Cai Fang: The meaning of the demographic dividend is that there is an adequate supply of labor, and because the younger generation is often more educated than the previous generation, new growth labor forces are constantly emerging, which can drive the rapid growth of human capital. In this case, no matter how much capital is invested, there will always be corresponding human capital and labor to match. In addition, there is a large amount of labor that can be transferred from other low-productivity sectors, such as agriculture, and reallocated resources. All of this contributes to the potential growth capacity of an economy.

Although the current Chinese population has shown negative growth and the advantage of labor resources has weakened, there is still huge potential to be tapped, for example, the scale of labor transferred from agriculture is still huge. When we talk about the adequacy of labor, we mainly focus on the demand for non-agricultural industries. According to statistics, the proportion of agricultural labor in advanced economies is about 3%, and China's is as high as 23%, narrowing the gap of 20 percentage points between the two means that the huge labor force can gradually be transferred from agriculture in the next 10 to 20 years. To this end, it is necessary to tap the potential by means of reform, such as deepening the reform of the household registration system and allowing migrant workers to settle in cities and towns.

Cai Fang, The Era of Negative Population Growth: Challenges and Opportunities for China's Economic Growth. Photo courtesy of interviewee

In addition, future economic growth will be constrained by the demand side, especially to deal with the problem of insufficient consumption of residents. In an aging society, the consumption capacity of the elderly is relatively weak, and the burden of old-age care will also change the consumption concept and squeeze the willingness to consume. In this context, it is necessary to relieve the worries of people's consumption. On the one hand, the government should strengthen the guarantee of public services in childbirth, parenting and education; On the other hand, it is necessary to provide higher quality training in employment policies to promote human capital development. Once workers are more fully employed and move faster vertically, their incomes and spending power will also rise. In general, there are reform dividends on both the supply and demand sides, which can directly increase the rate of economic growth and benefit everyone.

At the mobile phone public welfare class for the elderly opened by the convenience service center in Dagong Town, Hai'an City, Jiangsu Province, volunteers instructed the elderly how to use smart phones. Photo by Zhai Huiyong

China News Agency: Dozens of countries and regions around the world are experiencing negative population growth. Can China learn some lessons from the challenges posed by the new demographic situation to economic growth?

Cai Fang: The impact of negative population growth on the economy is a "gray rhinoceros", but it may also produce unforeseen "black swan" events. Learning from other countries and avoiding the demographic transition from impacting economic growth requires attention to four key words.

First, a Japanese-style response. In the mid-20s of the 90th century, Japan's working-age population began to grow negatively, the potential growth rate decreased, and the supply-side growth capacity decreased significantly. However, at this time, Japan had done little to improve productivity and enhance supply-side capabilities, and policymakers and economists generally believed that the crux was demand-side shocks, so it promoted large-scale policies to stimulate investment demand, and triggered an unprecedented economic bubble in economic history. In the end, Japan had to burst the bubble and fall into the "lost thirty years."

Second, the "Japanization" of the European and American economies. Developed countries in Europe and the United States as a whole have encountered problems such as aging and stagnation of population growth, resulting in insufficient investment willingness, declining consumption, and excessive saving, which in turn has led to low interest rates, low inflation, and low growth. In order to stimulate the economy, these countries can only increase the debt ratio, and finally form a long-term stagnation pattern of "low inflation, low interest rates, low growth, high debt" and "three lows and one high". This phenomenon began in Japan, and then in Europe and the United States.

Third, the Covid Break. The coronavirus pandemic has temporarily halted the trend of "Japanization" of the European and American economies. During the epidemic, European and American countries implemented loose monetary policies, large-scale fiscal stimulus, and issued a large number of subsidies to residents, thereby supporting consumption. However, due to the supply shortage caused by supply chain disruption and the supply and price shocks of oil and grain caused by the Ukraine crisis, the supply side encountered insufficient supply without weakening demand, resulting in high inflation not seen for decades, and finally had to turn around and raise interest rates.

In the winter of 2022, customers ask for cheese prices at Grand Central Market in New York. The United States suffered the worst inflation in 40 years. The year-on-year increase in the consumer price index (CPI) has remained high above 6% after peaking at 9.1% in June, and persistent "feverish" inflation has weighed on the economy. Photo by Liao Pan

Fourth, the "Japaneseized" variant. It is still difficult to determine what will happen after the European and American interest rate hikes, whether it will return to the secular stagnation of "three lows and one high", or whether it will form a worse combination of high inflation, high interest rates, low growth and high debt. Heated debates continue among mainstream macroeconomists in these countries, and the direction of central bank policy is unclear.

All these factors are the "black swan" events that the "gray rhino" of the population problem may produce under various causes and circumstances. But in dealing with challenges, unlike Japan, Europe and the United States, China has taken the right and successful first step by deploying supply-side structural reforms, which it has done very well over the past decade. Now that the demand-side problem has emerged, China has actively tapped the demand-side reform dividend by promoting the realization of common prosperity and other deployments. At a time when the downward pressure on economic growth is increasing, I expect China's reform efforts to be further intensified, releasing more potential reform dividends. (End)

Respondent Profile:

Cai Fang is the chief expert and member of the National High-end Think Tank of the Chinese Academy of Social Sciences, member of the Standing Committee of the 13th National People's Congress, vice chairman of the Agriculture and Rural Affairs Committee, member of the People's Bank of China Monetary Policy Committee, and former vice president of the Chinese Academy of Social Sciences. He has long been committed to the research of China's economic issues, and his main research areas include China's economic reform and development, population and labor economics, economic growth, income distribution, and poverty reduction. He has won the Sun Yefang Economic Science Award, China Publishing Government Award, China Economic Theory Innovation Award, Zhang Peigang Development Economics Outstanding Achievement Award, China Development Hundred Talents Award, China Population Award, China Rural Development Research Award, etc.