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Published: 00:15, February 01, 2023 | Updated: 10:02, February 01, 2023
China tackles great challenges to transit to quality growth
By Andrew KP Leung
Published:00:15, February 01, 2023 Updated:10:02, February 01, 2023 By Andrew KP Leung

China’s population fell by 850,000 people in 2022, the first such contraction in six decades, according to data released by the National Bureau of Statistics.

The national birth rate fell to 6.77 births per 1,000 people against a death rate of 7.37 per 1,000 people. Meanwhile, China’s aging crisis is deepening, with 280.04 million people aged over 60 at the end of 2022. A legacy of China’s now-ditched one-child policy, the so-called “4-2-1 phenomenon” is not uncommon, in which one single working young adult has two retired parents and four grandparents. As a result, China will be grappling with a shrinking workforce, decreased spending power, a strained pension system, and declining productivity. So warn demographers and economists. 

Aging is a worldwide trend, including many advanced countries. According to the World Health Organization, between 2015 and 2050, the proportion of the world’s population over 60 will nearly double from 12 to 22 percent.

Some nations are aging much faster than others. An acute example is Japan, where for the first time, people over 75 years of age make up 15 percent of its population, and those 65 years of age or over, 29.1 percent. Unsurprisingly, by 2030 Japan is expected to lose its status as the world’s third-largest economy to a much more populous, and younger India.

China’s relative high costs of starting and rearing a family, together with changing lifestyles, have witnessed plummeting marriage and birth rates. Questions are being asked if China will follow Japan’s path of rapid aging, sliding into relative economic decline.

Decade after decade, repeated predictions of China’s “coming collapse” by China-doubting practitioners have proved hollow, oblivious to the country’s well-tried resilience. Meeting China’s current demographic challenge, a number of game-changers come to mind.

China is now seeking qualitative instead of quantitative growth. As evident from small but rich advanced nations like Switzerland, “total factor productivity”, a measure of productive efficiency, is far more important than sheer labor input.

According to the McKinsey Global Institute, 800 million current jobs will be lost to robotics around the world by 2030. Head count is becoming obsolete.

China is embracing the Fourth Industrial Revolution with a vengeance. Artificial intelligence, robotics, the internet of things, 3D printing, genetic engineering, quantum computing, and other technologies are becoming part of daily life. Staff-less supermarkets, stores, hotels and restaurants are beginning to emerge in various urban centers. With digitalization, far fewer hands are needed to boost productivity.

China is now seeking qualitative instead of quantitative growth. ... Hostile decoupling notwithstanding, China remains firmly entrenched as a central hub in the global supply and value chain. Both international trade and foreign direct investment in China increased during 2022, despite the pandemic lockdown, trade tariffs and other obstacles

China has developed the world’s largest higher education manpower pool, with 240 million people having received higher education and a current total of more than 44.3 million, a solid foundation for quality development.

China is set to graduate nearly twice as many people with science, technology, engineering, and mathematics (STEM) doctorates as the United States by 2025, with more than three times as many STEM doctorates as the US, excluding foreign students, according to Georgetown University’s Center for Security and Emerging Technology. This should help propel China’s long-term economic productivity. 

China has made huge strides in becoming a norm-setter for international patents and standards, where there is far more money than sheer production. According to a report in the South China Morning Post, China’s patent filings quadrupled in a decade to over 1.3 million in 2019, overtaking the US as the top applicant for international patents under the Patent Cooperation Treaty. Meanwhile, trademarks filed by Chinese entities grew almost eightfold in the same period, according to the World Intellectual Property Organization. In 2020, China was the top trademark applicant at the European Union Intellectual Property Office, followed by Germany, the US, Italy and Britain.

As reported in the MIT Technical Review on Smart Cities of April 28, 2021, 70 percent of China’s population will become urbanized by 2035, characterized by five regions of “megacity clusters”, each with a population of some 100 million citizens. All of these are linked by China’s legendary high-speed rail. Already totaling 42,000 kilometers, two-thirds of the world’s combined equivalent, China’s high-speed rail system is to double to 70,000 km by 2035, enhancing the nation’s total productivity.

Hostile decoupling notwithstanding, China remains firmly entrenched as a central hub in the global supply and value chain. Both international trade and foreign direct investment in China increased during 2022, despite the pandemic lockdown, trade tariffs and other obstacles. This centrality is being consolidated with the Regional and Comprehensive Economic Partnership, the world’s largest trading bloc representing a third of the world GDP and a third of the world population. Through global Belt and Road infrastructural, trade and investment linkages, more and more developing countries, including those in the Middle East, are also gravitating toward the huge China market.

Many of China’s 280 million elderly people are enjoying their role as a “silver-haired workforce”, paid or voluntary, for various activities including community work, childcare, business mentoring, poverty relief, environmental protection, etc, adding to the nation’s economic functioning, social cohesion, and “common prosperity”.

In the face of worsening demographics, in addition to a formalized three-child policy, provisions and measures are being put in place by various municipalities, such as a deferred retirement age, one-off bonuses for new births, subsidized childcare, and workplace nurseries, with reduced costs of university education a distinct possibility.

A World Bank study shows that over the past 40 years, the number of people in China with incomes below $1.90 per day — the World Bank’s International Poverty Line to track extreme poverty — has fallen by close to 800 million, three-quarters of the global total of those living in extreme poverty. This underpins the national imperative of “common prosperity”, enshrined in the 20th Party Congress, along with doubling the middle-income cohort from 400 million to 800 million by 2035.

A smaller population size will further boost China’s per capita GDP, well past the so-called “middle-income trap”, on a trajectory to becoming a well-off, modern, and harmonious socialist country by midcentury.

The author is an international and independent China strategist based in Hong Kong. 

The views do not necessarily reflect those of China Daily. 

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