📈 Chartpack: China’s economic destiny [Part 1]
What are the implications of China’s demographic transition?
Imagine it’s 2050, and you’re at the pulsating heart of the world’s economic titan. Neon blazes a Babel of messages at you, drones hum overhead, monitoring, ferrying, delivering with relentless efficiency. The air crackles with the power of global commerce. But where are you? Are you dwarfed by New York’s soaring skyline, or bathed in the glow of Shanghai’s resplendent Bund? Which nation has claimed the economic crown in 2050?
Since 2003, economists have suggested that the answer is China, whose GDP they predict will soon surpass that of the United States. But are they right? In 2011, Goldman Sachs predicted it would happen in 2026. Now Goldman says it will only be in 2035. In fact, on a PPP basis, China surpassed the US in 2017, but in our analysis, we are focusing on nominal GDP, measured in current US dollars, because it better reflects the actual output of an economy and its potential power in the global marketplace.
In this Chartpack, spread over two weeks, I posit that China’s economic destiny will be defined by two factors: its demographics and its innovation ecosystem. There are other considerations, to be sure, like its mammoth debt problem1 and its unique political culture2, but none of them are on a comparable scale. In part 1, we will explore China through the lens of its demography.
China is facing a demographic crisis: its population is in decline. What’s more, this decline is creating a precarious imbalance: the labour force—those between 15 and 64 years—is contracting, while the elderly population outside the labour force swells. This imbalance puts an increasing burden on the welfare system. The challenge is not unique to China, but the speed and scale of its demographic transition catapult this issue to the forefront of national urgency.
Consider Japan, a prime historical precedent. In the 90s, Japan grappled with a startling decline in its labour force, much like China today. The contraction had painful economic consequences: Japan’s GDP per capita growth plummeted. The country, once an emblem of relentless economic advancement, stalled. Without intervention, this could be China’s fate.
Ironically, the problem of China’s population decline has its roots in overpopulation concerns.