Worrying demographic changes

China's working-age population, that is people aged from 15 to 59, registered a rare and worrying decline in 2012, decreasing by 3.45 million to 937 million, according to the National Bureau of Statistics. The proportion in the total population shrinking by 0.6 percentage points to 69.2 percent. This is worrying as the NBS predicts the decline will continue to 2030.

This demographic change means China's sustainable economic growth will gradually lose two favorable conditions: the absolute advantage of labor supply and the comparative advantage of cheap labor. Considering most people are retired at the age of 60 in China, the decline in the number of people aged from 15 to 59 will affect the economy and aggravate the country's labor shortage.

Distinguishing between the working-age population, labor force and employed population will be helpful when interpreting the economic impact of a declining working-age population.

The working-age population includes some disabled people who can't work, the labor force covers all that can work, even those under 15 and above 60, and the employed population is people in real production positions contributing to growth.

The essence of the demographic dividend is the accumulation and development of human capital, or the contribution by and value of the population. The demographic dividend can be interpreted in a variety of ways, such as the population growth dividend, the labor force dividend or the female population dividend. However, the window of opportunity opened by a low ratio population burden can't be perceived as a population bonus.

Despite its declining numbers, China's working-age population is still large. The country's population advantage is some 937 million people. It would be a misinterpretation to suggest the decline in the working-age population is passing the Lewis Turning Point, the time when all the surplus rural labor has been transferred and absorbed by the economy.

Rather than focusing on the whole population, China should be more aware of the change in its young population and the restraint the decline in the young population will have on economic growth. While the decline of the working-age population is actually a corollary of the country's low birthrate and therefore could become a lingering trend, what decides the future is the number and quality of young people entering the labor force.