China: How to meet population challenges
July 13th 2012
China, perhaps more than any other country, faces many important and difficult population challenges: reproductive health and reproductive rights, rural-urban migration and reform of the hukou system, and imbalances in the sex ratio at birth. And two deeply connected population issues, the rapid aging of the population, on the one hand, and the low birth rate and the family planning policy on the other, are of great significance to China’s future development.
China’s population is aging as rapidly as anywhere in the world and its low birth rate means it faces a significant population decline in the not too distant future. In part, China’s population will age because people are living longer, an important dimension of China’s great progress. But the country’s low birth rate is the most important reason for population aging, leading to a very top-heavy age structure with many elderly, fewer workers, and even fewer children.
The low birth rate and population aging mean China faces two important economic challenges. The first is maintaining economic growth and poverty reduction, while the second is ensuring economic security for hundreds of millions of elderly.
First, China needs to retool its approach to capital accumulation. High rates of saving and investment have been critical to fueling economic development, but wealth accumulated by State-owned enterprises and in sovereign wealth funds is not creating economic security for China’s elderly. China needs to refocus its efforts on building strong and successful pension funds that can meet the dual goals of supporting both economic development and economic security for the elderly. China doesn’t need to save more. If anything saving rates are too high. But China needs to save in a different way.
Second, China needs to make better use of its older work force. Labor income peaks at a very young age in China and drops sharply at a much younger age than in other countries in Asia, including South Korea, Japan, India, and Indonesia. Life expectancy is rising in China and older adults are much healthier than in the past. Extending the years spent in employment, lifelong learning, and better employment opportunities for older workers will contribute to stronger economic growth and better economic security for the elderly.
Third, China needs to reconsider its family planning policy. The low birth rate is leading to accelerated population aging making it more difficult to sustain economic growth and to meet major population challenges.
Read the rest of this article: China Daily
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