China’s working age population is starting to decline, which could have dire consequences for the second largest economy in the world.
The number of workers aged 16 to 59 dropped by a record 4.87 million in 2015, down from the previous year’s drop of 3.71 million, according to China’s National Bureau of Statistics, cited by the WSJ.
The number of “potential workers” — or those aged 15 to 64 — first started falling in 2012, according to the FT.
Moreover, the World Bank warned that China’s working age population could fall by more than 10% by 2040 — even with the end of the one child policy.
Although a 10% drop might not sound too scary, that adds up to about 90 million Chinese workers, which is approximately equal to the total populations of Germany and Sweden.
In short, “China’s working age (15-64) population has peaked and is set to decline, which will weigh on China’s long-term potential growth rate,” wrote a Macquarie research team led by Larry Hu in a recent note to clients.
At the same time, China’s elderly population is set to skyrocket.
In a recent report on the global ageing phenomenon, the US Census Bureau shared some comparisons between China’s over-65 population and the total population of several developed markets to give a sense of how big this group of people is/will be:
- In 2015, the number of older people in China (136.9 million) exceeded Japan’s total population (126.9 million).
- By 2030, Japan and Egypt’s combined total projected populations (231.8 million) will be smaller than China’s projected 65-and-up population (238.8 million).
- And by 2050, China’s projected older population (348.8 million) will be approximately equal to the combined total projected populations of Japan, Egypt, Germany, and Australia.
So, while the percentage of China’s population over the age of 65 may not be as large as that of Japan, South Korea, or various European countries, China’s enormous overall population (roughly one out of every five people on Earth) means that the total number of older people living in China is and will be much larger than in other countries.
These two trends together lead to worries about what this will mean for the country’s economy going forward.
If these projections hold, there will be far more older residents who will likely want to retire, with fewer working-age citizens to support them.
Ageing populations have generally been a problem that more developed markets like Japan have had to deal with, rather than emerging economies like China.
So, one could argue that China is basically an emerging market that is now struggling with a developed market problem.