The Chinese Demographic Time Bomb

                                 
                                               "Demographic is destiny"

                                                                                       ---August Comte


It is well known that the Chinese are growing old before they grow rich. They are not making enough babies to sustain the population. Most people, when they hear about this, go straight to the lost of labor and declines of the economy. Actually, the decline of the population does not have a big impact on the economy in the short term. The reason is productivity gain and economic growth occurs at a much higher rate compared to population decline. The population decline is also counteracted by lengthening of the life span and thus increasing the productive years left for each person. Increased life span also has the effect of increasing population size, at least in the short term.

Nor is liability for the elderly going to be a big issue for government finance. Unlike the United States with Medicare and Social Security, the Chinese government does not have formal agreements with the population to provide for the elderly with certain level of benefit. What is more, the elderly in China have seen a steep change in prosperity from when they grew up, and will be very happy with whatever benefit that they will get.

The imperceptible nature of demographic change makes it easy to mask titanic and dire changes until decades later, at which time it will long be fait accompli. Imagine a situation in which China cease to have any babies. Each year, the population would decreased by 1.5% or so. Since the kids would not even be productive until they turn 20 or 25, we won't see any change in economy for a while. Thirty years later, the entire nation has gone extinct, but there would still be six or seven hundred million souls walking about. In certain part of the country, you could still say that there is over population. At this time though, there would be some dramatic change in the economy. Work that require youthful physical labor would find it increasingly impossible to hire. The pool of old folks relative to the general population has shot up dramatically. Someone must care for them. Both of these situations hugely incentivize import of menial labor. The Japanese and the Koreans, who are currently at an advanced stage of aging, have resisted this urge. They are right to do so. Due to the nature of the work involved, the people thus imported will likely have significantly lower IQ compared to the native population. Just as the Hispanics in the United States, they will form a permanent underclass that will increase crime and contribute to the internal strife of the nation that import them.

The current Chinese total fertility rate(TFR) is about 1.5. This number is similar to the developed world in general. A TFR of 2.05 is required to maintain the population. However, the trend is ominous. The TFR for most Chinese urban areas is around 1 or less. Since the Chinese are urbanizing at a very fast pace, the national TFR will fall from 1.5 toward 1 as more and more Chinese move from rural areas to cities. At TFR of 1, the young population gets cut in half every generation. Unless China succeeds in getting young people in urban areas to have more babies, they will not be able to reverse this trend. So far, not a single country who see low TFR has the ability to reverse the trend. Without intervention to break the trend, China will zoom past Europe and United States to become some of the oldest populations in the planet.

On the positive side of the ledger, the Chinese starting out with larger number of babies. Among the high IQ population of European and East Asian countries, the Chinese gave birth to more than twice as many babies as the rest combined in 2016. There is still some time to fix this problem. If the government is able to find a solution to stabilize the population, they would pull off something that no other government could.

In the longer term, if China can resist bringing in low IQ immigrants, the low birth rate would eventually fix itself. That is because those who have babies by definition pass along their genetic and cultural attributes to the next generation, who would be more inclined to have babies in this urban environment. After many generations of weeding out the people who will not have kids, the younger generations will have a much stronger drive to reproduce, despite the urban environment that deterred others in the previous generations. The Chinese can accelerate this by allowing as many babies as anyone would like to have.

Longer term, demographic implosion is the biggest danger to the rise of China. The Chinese have some time to fix this problem, but the trend is unmistakable. The awful statistics of the other East Asian countries points to an ominous future. Hopefully, the Chinese can intervene and turn this around.