Donnerstag, 30. April 2009

Demographics: China vs. Rest of World

Recently, several China blogs discussed the topic of China's rapid aging (e.g. Michael Pettis and Mark's China Blog, both apparently drawing on this source).

The prevailing theme: China is heading towards a demographic catastrophe, as the population is aging fast, and the children of the one-child-policy will face a close-to-unbearable burden. Michael Pettis even argued that "by 2030 Chinese will be older than the rapidly aging Europeans, with one of the highest, perhaps the highest, percentage of people over the age of 65 in the world."

But here's the thing: China may be aging fast, and this will undoubtedly cause all sorts of serious problems, but China's fertility rate is by no means extremely low.

Good sources for fertility data are PRB and the CIA. Let's use the CIA data for 2008 and see what it tells us:

- China has a fertility rate of 1.77

- Developed countries with a similar rate: Ireland (1.85), Australia (1.78), Norway (1.78), Denmark (1.74), Finland (1.73), Sweden (1.67), Netherlands (1.66) and UK (1.66)

- Developing countries with a similar rate: Vietnam (1.86), Algeria (1.82), Tunisia (1.73), Iran (1.71), Thailand (1.64), Cuba (1.60)

- Developed countries with a much lower rate: Germany (1.41), Italy (1.30), Spain (1.30), Japan (1.22), South Korea (1.20), Taiwan (1.13), Singapore (1.08), Hong Kong (1.00)

- Developing countries with a much lower rate: Russia (1.40), Ukraine (1.25), all the rest of Eastern Europe (1.2-1.5)

So apparently, China's fertility rate is comparable to or even significantly higher than in most of Europe (with the exception of France), it is much higher than in developing Eastern Europe, Russia, Japan, Korea and Taiwan, and it is quite similar to various Asian and North African developing countries.

What does that mean for China's aging society?

Well, it doesn't make it any easier for China to cope with its aging process, but claims that China will be "older than Europe" and perhaps have the "highest percentage" of 65+ seniors in the world are simply wrong:

- Ceteris paribus, fertility rates determine both long-term population growth/decline and long-term aging of a society.

- If a country has a high life-expectancy, it will grow older than other countries with the same fertility rate. China has high life-expectancy for a developing country, but still lags far behind Japan and Western Europe (though apparently, Beijing and Shanghai already have a life-expectancy on par with the US!). Maybe it will catch up over the next 20 years, but there's no reason to assume that it will surpass those countries. So this cannot explain why China should become older than those lower fertility countries with similar or higher life-expectancy.

- Immigration tends to ease aging, emigration worsens it. China has some net emigration, but it is negligible in % terms. Many of the low fertility countries listed above have low immigration or even substantial net emgiration (in particular most of Eastern Europe). So again, there is no reason why China would become older than Eastern European countries with lower fertility and higher net emigration, or older than any of the various countries with at best small net immigration.

- China has a distorted sex ratio: Normally, 1.06 boys are born for every girl. That's why a "stable population fertility ratio" is usually defined as 2.06 (-> 2.06 kids are needed to have 1.0 girls). In China, the necessary ratio may be as high as 2.20-2.25, as some of China's provinces have a strong prefernce for boys and abort huge numbers of females. This means that China's 1.77 fertility rate equals roughly 1.60 in a country with a "normal" sex ratio. This aspect makes China a bit older, but there are still plenty of countries with lower fertility left on the list.

So which countries will most likely remain older than China?

- East Asian countries with lots of cultural similarities to the PRC (Japan, South Korea, Taiwan, Hong Kong and Singapore) have the lowest fertility rates worldwide, far lower than the PRC. As they also have some of the highest life-expectancies, and - apart from Hong Kong and Singapore - little net immigration, their populations will almost certainly stay much older than the PRC.

- Most of Eastern Europe (including Russia and Ukraine) will fare even worse, as very low fertility rates go hand in hand with substantial emigration. Based on current trends, these countries will probably become the world's oldest societies quite soon.

- Germany, Italy and Spain will do a bit better, but they also have very low fertility rates. Immigration helps a bit, but only Spain has taken in substantial numbers of immigrants in recent years. Germany in particular has seen very modest net immigration. Therefore, it is very likely that Germany and Italy (and possibly Spain if immigration slows down) will also remain quite a bit older than China.

- Iran, Thailand and Cuba are countries with fertility rates, net emigration and life expectancy similar to China. Therefore, they will age to the same extent that China does (though in Iran and Thailand, this will happen a bit later, as fertility rates came down more recently than in China).

(For an earlier post on the same subject, click here)

Kommentare:

  1. This is a nice, well-researched post, Thomas.

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  2. If we say that,the Chinese fertility and aging profile is better than in the EU,then the EU can not be the investment target of China, because in that case there is not enought absobation capacity for any debt.
    The USA have too much debt compared to the sustainable level.
    So,ther remaining investment target is India,so the EU and by a smaller level China have to run trade surpluss with India.

    http://bomlat.blogspot.com/2009/05/aging-profiles-and-international-trade.html

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  3. http://finance.yahoo.com/tech-ticker/article/237940/%22Split-Down-the-Middle%22-Why-China-Won

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  4. The more people, the better the future for a nation? Let's invest in Nigeria...

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  5. @Anonymous1:

    I'm not really convinced by the article you link to. I don't see China disintegrating into a "coastal country" and the "poor rest". None of the many Chinese people I know considers such a scenario even remotely likely.

    @Anonymous2:

    Personally, I think the "best" fertility rate is slightly below 2: Population dropping a bit to ease the world's resource-constraints, but not rapidly falling off a cliff (as it will in countries with fertility rates below 1.5).

    Though considering the long-term nature of demographic change (even if worldwide fertility rates keep dropping everywhere, world population will keep rising until way beyond 2050), the world should probably be thankful for every country with very low fertility. Resources will anyway become scarce enough over the next few decades.

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  6. @Anonymous2:

    A few weeks ago, I received an e-mail from "The Honorable Dr. Mgumba Burere, oldest son of Professor Ngimba Burere" from Lagos, who was looking for help to invest his considerable fortune in China. Apparently, the Nigerian government does not want its citizens to invest in China, so he needs somebody in a Western country to front for him, and he offers 20 % of the profits.

    I nearly wouldn't have read the mail, because for some strange reason, Yahoo Mail had sorted it into the Spam folder. As it happens, I did read it. But for some reason, I didn't write back. Probably missed my chance to get really rich. Oh well.

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  7. Excellent research Thomas. Though I do question how the fertility rate of 1.77 was identified. City residents in China are required to strictly adhere to the One Child policy. In addition, normal child bearing age in the cities appears to be moving quickly towards women's late 20s. Controls are increasingly being applied to migrants workers seeking to integrate into city life (ie. city residence only being permitted for those complying with family planning).

    Yes, the majority of the population continues to live in the countryside where family planning is less strictly enforced and where a second child is permitted for most rural residence permit holders. However the urban population is rapidly catching up to the rural population and will surpass it in 2015. See: http://www.china-profile.com/data/tab_rurpop_1.htm and http://www.china-profile.com/data/fig_urban_2.htm.

    In effect, more and more people will be caught in the strict One Child Policy net. Fertility rates will continue to decline.

    Yes, floating migrant populations in Chinese cities flout these requirements, but on the ground it gets tougher and tougher. Jobs, children's schooling, access to health and other services are all increasingly dependent on compliance. More and more rural migrants to the cities are seeking to regularise their residency and obtain city "hukou". Compliance with the one child policy is a basic requirement to obtain formal residency and to obtain access to city schools.

    I have lived in China for 10 years and can see very large numbers of children but very few families with more than one child.

    I would suspect that the figure of 1.77 does not apply to the current group of women of child bearing age (it's probably below this already) and moving forward, with rapid urbanisation of population caught in the one child net) it will decline further.

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  8. Thanks for your comments, Chris.

    From what I understand, the 1.77 figure is based on recent data. Some experts even seem to believe that it understates true fertility, as some rural areas underreport births to fulfill their "birth reduction quota".

    According to regional studies, Shanghai and Beijing have had fertility rates of only 1.0 for the last two decades, so big city fertility is indeed far lower than the countrywide average (and from anecdotal evidence, it seems to me that most Shanghai women are not particularly interested in having more than one child, so it probably wouldn't matter all that much if restrictions were eased). On the other hand, some provinces with large non-Han minorities still record fertility rates above 2.0 (as most minorities are entitled to have two or sometimes even three kids).

    If we believe that the whole country will eventually follow the "big city example" (and the extremely low fertility of Chinese populations in all "unrestricted" areas, i.e. in Hong Kong, Macao, Taiwan and Singapore seems to indicate that this is quite likely), then we should assume that countrywide fertility will keep dropping.

    Personally, I think that's probably a reasonable assumption to make, but it will be a slow process, i.e. it will take the country at least another decade or two before countrywide fertility falls to the extremely low levels seen elsewhere in East Asia. Taking into account that newborn children only join the workforce 20 years later, the full impact of such a drop would therefore only be felt in 2050 and beyond.

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  9. The drop in the fertility rate could be quick.
    If the economy crisis will go with full speed in China,then the drop in fertility could be 0.2-0.5,within a few year.
    This could be the simplest way to improve the living standards.

    This was the same in eastern europe.
    The drop in the fertility was only a few year.

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  10. True, birth rates in Eastern Europe dropped very fast in the 90s, and the economic situation was a major factor.

    Not sure if China is the same, though: In China, the poorest (= farmers in low-income provinces) have the most kids, and the reasonably well-to-do (= city-folks in the East and South) have the fewest kids. From what I can tell, birth-rates dropped fastest in those areas of China that were economic success stories.

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  11. quick calculation:
    (300_mill_city_res*City_fertility_rate)+1000_millio_rural_res*Rural_fertility_rate)/1300_millio_chinese=Chinese_fertility_rate

    City_ferility_rate=1
    Chinese_fertility_rate=1.7
    Result:
    Rural_fertility_rate=1.91

    If the City_ferility_rate change by 0.2,then the full Chinese feriltiy rate will change by 0.05(rough calculation,it came from the ratio between the city/rural residents)

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  12. (300_mill_city_res*City_fertility_rate)
    +1000_millio_rural_res*Rural_fertility_rate)
    /1300_millio_chinese=Chinese_fertility_rate

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