Over the last few months (years?) there have been concerns raised by commentators that China’s astonishingly rapid economic growth is slowing down. According to Philip Bowring in the Wall Street Journal, one of the latest watchers to make that claim is the IMF. Its World Economic Outlook is predicting a “sustained fall in growth rates in developing countries, including China”. One hope that optimists cling to is that China could step up urbanisation and tap into still-unused rural populations to sustain its medium term GDP growth. As Bowring states:
“China’s official urbanization level is currently only 51%, though there are estimates above and below this. In line with President Xi Jinping’s push for urbanization, 70% of Chinese could be living in cities in 2030. Since China needs to improve its highly skewed income distribution by moving people to more productive urban jobs, the addition of some 280 million urbanites sounds exciting and looks straightforward.”
However, there are serious issues with this solution. The goal may be 70% urbanisation, but the pool of people from which internal urbanisation is drawn from is shrinking. The rural young as a group is in decline and the outlook for greater numbers of young in the city or country is also bleak:
“Those who migrate to the cities are mostly young Chinese under 30 years of age. But their number is contracting steadily, from 347 million in 2010 to 266 million by 2020 according to U.N. projections. A gender imbalance among the urbanizing young means that the number of marriages and new households will decline even faster once young workers reach marrying age. The trend to later marriage may also continue.
Urbanization is itself adding to China’s demographic challenge. The fertility rate has been falling continuously even as the one-child policy has in practice been relaxed. The high costs of urban living and the difficulties of obtaining a hukou registration are now more to blame for the low fertility rate than the one-child policy. The number of children between the ages of five and nine have fallen from 109 million in 2000 to 78 million today. According to an official report, 13,000 primary schools closed in 2012.”
As with so many things dealing with China, the numbers are simply mind-blowing. 13,000 primary schools closed in one year! Furthermore, as Bowring notes, urbanisation is not an end in itself. China needs to ensure that jobs and a decent quality of life are available for its city dwellers.
“Urbanization should not be a goal in itself but the outcome of positive developments in the economy, the impacts of education and industry in particular. The sheer number of city dwellers is not a reflection of positive development. The Philippines, for example, at 48% is almost as urbanized as China. But with few jobs available in manufacturing, migrants mostly find only low-income employment in the urban informal sector.
Migrants’ lot in China is set to gradually improve under the impact of labor shortage and growth of small cities with more liberal policies. The hukou system of household registration seems likely to be phased out within five years. This may both attract more urban migration and increase demand for urban housing as the migrant population gains the means to acquire property. But drawing productivity out of this group will also mean more spending on health and education instead of just construction.”
It seems that demography is set to continue to be a major factor on China’s continued economic growth. Up until now, China has benefitted from the demographic dividend of a large workforce. However, this dividend looks to be running out. Whether China can continue to grow at such rates as it has in the past remains to be seen. Here is one view from the Telegraph in the UK that China is not going to catch up to the USA in the 21st century. An interesting read. If economic growth slows down over the next few years in China, what next for the country and the communist party there?