China’s Demographic Timebomb

An aging population, rapid urbanization, and a skewed sex ratio could spell trouble down the line for the world’s largest country:

China is different from the other aging countries of the world in that a) it is not yet fully developed, b) most of its population is still poor, and c) it has the highest sex ratio in the world.

By 2055, China’s elderly population will exceed the elderly population of all of North America, Europe and Japan combined, and this is exacerbated by the now declining working-age population. China’s impressive economic growth has been facilitated by its expanding working-age population: The population ages 15-64 increased by 55 percent between 1980 and 2005, but this age cohort is now in decline due to the declining fertility rate. In 2012, the working age population declined by 3.5 million and is expected to continue to decline unless there is a dramatic shift in China’s fertility rate.

Aging will have a negative effect on economic growth through higher pension and healthcare costs, fewer low-income jobs, increased wage depression, slowing economic growth and job creation, declining interest from foreign investors, lower entrepreneurship, and higher budget deficits. Labor force declines also translate into lower tax revenues for governments, and if these governments are tempted by deficit financing, global financial stability may be compromised, according to the Center for Strategic and International Studies (CSIS) Commission on Global Aging.