Discontents of demography

China should refrain from excessive stimulus policies to offset the impact of decrease in working-age population

China has been racking its brains on how to combat the economic slowdown, but it should pay more attention to the alarm sounded by the drop in its working-age population.

The drop in the working-age population, a major long-term underpinning force of a country's economy, will determine China's growth prospects in the coming decades. China's bullish economic growth over the past 30-odd years has been mainly attributed to such factors as systematic improvement and attraction of foreign investment, but the abundant supply of low-cost labor has played a crucial role in driving the boom.

According to the National Bureau of Statistics, China's working-age population, defined as those aged between 15 and 59 years, fell by 3.45 million last year, the first decline at least in the past three decades.

Demographic experts agree that the trend will continue for some years, thanks mostly to China's family planning policy, which was implemented in the late 1970s. From 2012 to 2020, China's working-age population could decrease by more than 29 million, posing a threat to economic expansion, says Cai Fang, head of the Institute of Population and Labor Economics, affiliated to the Chinese Academy of Social Sciences.

As the number of young workers drops and the aging population continues to increase, fewer people will be available for employment. As a result, the cost of labor will increase. Moreover, the rising expenditure on healthcare because of an increase in the aging population will reduce the amount of capital available for investment, and thus drag down overall economic growth.

Since the working-age population has started declining, some experts call for the loosening of the family planning policy, while policymakers have to find feasible ways to iron out the possible economic fluctuations the decline would cause.