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China's Demographic Time Bomb

5:25 PM, Aug 21, 2008 • By JONATHAN V. LAST
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Nicholas Kristof writes today about the dazzling rise of China. I don't mean to over-extrapolate his argument, but he seems to be suggesting that in a generation, China will be the world's leading culture and economy. At least I think that's what he's getting at here:

Now the world is reverting to its normal state--a powerful Asia--and we will have to adjust. Just as many Americans know their red wines and easily distinguish a Manet from a Monet, our children will become connoisseurs of pu-er tea and will know the difference between guanxi and Guangxi, the Qin and the Qing. When angry, they may even insult each other as "turtle's eggs." . . .

This transition to Chinese dominance will be a difficult process for the entire international community . . .

The problem with Kristof's analysis is that it entirely ignores China's gigantic demographic problem. A combination of shifting societal mores and the government's harsh One Child Policy has pushed the Chinese fertility rate to somewhere between 1.9 and 1.3. You need a rate of 2.1 to maintain a stable population, which means that, by 2050, China will be facing two extreme challenges to their rising dominance:

(1) The country will begin hemorrhaging bodies. The U.N. Population Division projects that Chinese population will peak around 1.458 billion by 2030 and then begin contracting. By 2050, they'll be losing a net of 20 million people every five years with the contraction accelerating from there. Historically, very few societies have managed population contraction with economic and social stability, let alone prosperity.

It's theoretically possible that China could solve this problem by either encouraging immigration or mandating some sort of Two or Three Child Policy. But I'd argue that both of these options are unlikely. A closed, authoritarian society cannot easily brook large-scale immigration. And it's harder to force people to have babies than it is to keep them from having babies. Just ask the Soviets. The USSR suffered from low fertility rates and tried several times to goose the numbers, with no success whatsoever.
(2) As fertility declines, the age structure of a population shifts. The median age climbs and the ratio of elderly people to working-age people balloons. By 2050, China will have 330 million senior citizens. The ratio of seniors to workers (very broadly defined as anyone age 15 to 64) will be 1 to 4.

Who's going to support those old people? China's jobs are largely industrial and agricultural and education levels are still relatively low. So these seniors aren't in the type of economy which would allow them to keep working. China's pension system is almost non-existent. Which will leave the government three choices:

* Dramatically cut spending on defense and public works to pay for the elderly.

* Dramatically raise taxes on the young to pay for the elderly.

I'd argue that either of these choices would likely be fatal to China's hopes for global dominance. They might even risk revolution.

Which leaves a third option: Send the old people out into the countryside to die. This carries its own risks, too, of course.

In any event, I can't quite understand how Kristof can project forward China's path in the world without taking into account the central fact of modern China: However impressive the country looks right now, the Chinese are sitting on a demographic time bomb which cannot be defused.