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China’s Demographic Dividend

China’s Demographic Dividend. The possible benefits of TEMPORARY Population Growth. What drives China’s Growth?. Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization. Reform and Restructuring.

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China’s Demographic Dividend

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  1. China’s Demographic Dividend The possible benefits of TEMPORARY Population Growth

  2. What drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  3. Reform and Restructuring From Communist to Socialist with Chinese Characteristics From Central Planning to Market Driven Economy From Closed-Door policy to Open-Door Policy From Dictatorship to “Centralized Democratic” Decision Making Privatization

  4. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  5. What Drive China’s Growth? Urbanization -- more than 1.5 million per month Industrialization -- Raise productivity -- Monetize economic activities

  6. Urban / Total Population Source: United Nations, CLSA Asia-Pacific Markets

  7. http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?_r=0http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?_r=0 https://www.youtube.com/watch?v=bzBa947k2yY

  8. China: The largest migration in history | The Economist https://www.youtube.com/watch?v=KNXg-kYk-LU

  9. Two classes of urbanites

  10. What Has Driven China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  11. The demographic dividendExplained in 4 parts Part 1: Preliminary Steps • Country enters stage 2 of Demographic Transition • Results in large increase of children • Dependency ratio increases • Little to no change in elderly population life expectancy Part 1 and Stage 2

  12. Part 2: Window of opportunity opens Mechanics of situation • Country enters stage 3 of Demo. Trans. • Children decline as proportion of population (see diagram) • Dependency Ratio declines • Little to no change in elderly proportion Worker bulge appears (see diagram) Wise Country follows pro-development policies • Moves to creates Employment opportunities • Pursues international export strategy Part 2 and start Stage 3

  13. Part 3 Dividend Period • For about a generation the country rapidly grows and prospers • Workers support fewer dependents • Country’s policies insure ample employment, investment opportunities, and greater consumption Part 3 and still Stage 3

  14. Part 4 Window closes – but country developed • After a generation workers age and begin to retire • Stage 4 of Demographic transition entered • Dependency ratio climbs based mainly on elderly (see diagram) • As Dividend ends • Growth of economy slows but continues Part 4 and Stage 4

  15. Demographic Dividend Video https://www.youtube.com/watch?v=qZjdt73wdJA&t=30s

  16. Countries at various parts of the Demographic Dividend

  17. The demographic dividend in words The demographic dividend is a window of opportunity in the development of a society or nation that opens up as fertility rates decline when faster rates of economic growth and human development are possible when combined with effective policies and markets. The drop in fertility rates often follows significant reductions in child and infant mortality rates, as well as an increase in average life expectancy.

  18. As women and families realize that fewer children will die during infancy or childhood they will begin to have fewer children to reach their desired number of offspring. However, this drop in fertility rates is not immediate. The lag between produces a generational population bulge that surges through society. For a period of time this “bulge” is a burden on society and increases the dependency ratio. Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall and older generations having shorter life expectancies, the dependency ratio declines dramatically.

  19. This demographic shift initiates the demographic dividend. With fewer younger dependents, due to declining fertility and child mortality rates, and fewer older dependents, due to the older generations having shorter life expectancies, and the largest segment of the population of productive working age, the dependency ratio declines dramatically leading to the demographic dividend. Combined with effective public policies this time period of the demographic dividend can help facilitate more rapid economic growth and puts less strain on families. This is also a time period when many women enter the labor force for the first time.[1] In many countries this time period has led to increasingly smaller families, rising income, and rising life expectancy rates.[2] However, dramatic social changes can also occur during this time, such as increasing divorce rates, postponement of marriage, and single-person households.[3]

  20. End of Demographic Dividend China’s Case One Child Policy More Kids Dip More Elderly

  21. Following Japan Peak Years of “Cheap” Workers

  22. Dependency Ratio Old Kids

  23. Replace Brawn with Brains?

  24. Demography and Education Demography Dividend College Enrollment China’s Baby-boomer Generation Young and Educated With money, Will spend

  25. Brain power: US vs China Science and engineering PhDs Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets

  26. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  27. Saving is Virtue! Total Household Deposit in China US$5.13 Trillion Total Deposit Waiting to make deposit

  28. Household Savings / Disposable Income Higher Savings Ratio, Higher Capital Formation, Higher Growth Rate Source: Euromonitor, CLSA Asia-Pacific Markets

  29. “Scissors” crisis of aging – Cashing In Savings

  30. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  31. Globalization China Accounts for 10% of Global Trade

  32. Drivers for the Growth in Next Decade? • Reform and Restructuring should continue, but no more low hanging fruits • Urbanization and Industrialization another two decades to go • Demography Dividend and Education no more labor growth, productivity to go higher • Savings and Capital Formation need less savings to drive domestic consumption • Globalization slower export growth, trade balance

  33. No More Double Digit Growth

  34. But, Power of Compounding

  35. Uneven Spatial Development

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