Low population growth affecting China’s economic growth

BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/13

National Bureau of Statistics reports that the country’s population grew by 7 million last year to 1.375 billion, with 56 % of the people now living in cities and 44 % in rural areas. Urbanisation supports economic growth as cities offer people a wide variety of jobs and greater opportunities for productivity gains. The urbanisation process also drives construction, as urban infrastructure must be build for about 20 million people every year.

China’s shifting age structure, however, puts a damper on high economic growth and strain public finances. The working-age population (16–59 years of age) began to shrink in 2012. Referring to recent Chinese estimates, Global Times suggests that the share of the working-age population relative to the total population will fall from 66 % in 2015 to 57 % in 2030. At the same time, the percentage of pensioners in the population will rise from 16 % to 25 %.

With this rapid deterioration in the dependency ratio, the government is likely to announce higher retirement ages next year. The official retirement age is currently 60 years for men and 50–55 years for women, depending on the nature of the job. The average Chinese life expectancy has increased by more than ten years since 1978 to 77 years for women and 74 years for men.

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