Editor's Pick:

Preparing for effects of population trends

By Peng Wensheng (China Daily) Updated: 2011-05-26 07:59

The National Bureau of Statistics recently highlighted some significant results from China's Sixth National Population Census that point to some major changes in the country's population trends - changes that will affect the economy.

First, the annual growth rate of China's population has slowed remarkably in the past 10 years compared with the previous decade. Second, the percentage of both the working age population and the aged population have grown, while the proportion of children aged under 14 has declined, indicating an overall aging of the population. Third, education levels rose during the decade and literacy rates have continued to increase. Fourth, the urbanization process has been faster than expected, with almost 50 percent of the total population living in urban environments and an increase in the percentage of permanent residents in developed coastal provinces, while the population has fallen in the underdeveloped heartland provinces.

These trends make it necessary to explore the likely effects of the changing population structure on economic growth, inflation, property prices and the development of financial markets.

A reduction in the labor force will affect the potential growth rate, which is predicated on the consistent supply of workers, capital and productivity. Over the past 30 years, China's economic growth has been around 10 percent per year, due largely to the rapid growth of labor supply, capital resources founded on high domestic savings rates, and the rising efficiency of production.

As many developed countries have found - especially Japan with its seriously aging population - a reduction of labor supply affects economic growth. The saving grace may be that China is somewhat different, adding uncertainty to the plotting of future economic growth trends. For example, the increasing level of urbanization is good for economic growth. It means that rural labor is migrating from agricultural areas of low productivity to modern manufacturing and service industry zones of higher productivity.