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China’s Demographic Problems

by Marc Lerner

Two great new articles are published here on China’s very serious demographic problems. The first one, a Bank of America report, points out that the working age population in China peaked last year, whereas previously demographers had expected this to only happen in 2015. The second, from Stratfor, has some more interesting statistics in it: more than 13,600 primary schools closed throughout the country in 2012, while the elderly population is expected to rise from 300 million by 2025 from 194 million in 2012. Interestingly, one of the proposed solutions from the Chinese leadership has been to relax or abolish the one child policy. Whilst in the long term this may help the country’s demographic situation by increasing the working age population, in the short term it may well do the opposite as the amount of dependants – which includes both children and the elderly – rises relative the working age population. It is also unclear how much effect removing the policy will even have, given the country’s relatively low fertility rates.

In addition to a massive, unprecedented and unsustainable credit and property bubble, China also has to handle a demographic meltdown over the next decade or so. It is clear that this will affect the country very negatively. It is also unlikely to be positive for countries heavily dependent on China, such as Australia, although whether those countries pull through economically despite the end of the Chinese boom depends on a more complicated interplay of factors. At the very least, however, those companies that feed directly into the Chinese boom – iron ore and coal miners – are unlikely to continue to do well in this environment.