Finding future demographic balance

In late February, Foxconn Technology Group, the electronics manufacturing giant, halted recruitment at one of its key plants in Shenzhen, the cradle of Chinese economic reforms. The decision was motivated by plans to further automate production processes and the higher-than-expected number of workers that returned after the Spring Festival holiday.

Foxconn is not the first to move toward automation in China. Many multinational companies have been replacing human labor with automation. Chinese companies that have expanded into advanced economies have acquired advanced manufacturing technology, and, ultimately, they will bring home their new capabilities, in order to upgrade their domestic operations.

At the same time, the millions of college students who graduate in China each year are facing the harsh reality that a college diploma is no longer the assurance of a good job.

China is moving from one stage of growth to another. This transition is not new in kind. As advanced economies industrialized and moved from cost efficiencies to innovation, they had to cope with comparable challenges. But what makes the Chinese transition so distinctive and so challenging is its size.

The turning point has arrived in China's first- and second-tier cities, especially in the coastal regions. But in much of China - the third- and fourth-tiered cities, inland - industrialization has barely begun and the demographic dividend still offers great benefits.

But what if the current demographic trends are allowed to prevail? China's population size would peak at 1,395 million in 2025. In the next quarter of a century, it would decline by 100 million, to 1,296 million. As a result, the working-age population would drop to 53 percent, or 680 million (a loss of some 240 million in just 35 years). The old-age dependency ratio would soar.

How can the government alleviate the adverse impacts of the ongoing demographic changes?

When China's family planning policy, under which most families are allowed to have only one child, was introduced in 1979, the goal was to alleviate economic and social problems. But at that time, China's population was 970 million, almost 400 million people fewer than today population, and the population growth rate almost twice as fast as today. The current family-planning policy did not create the current demographic trends, but it has amplified them. That is why some of China's leading demographers now argue for an adjustment to the policy.

The goal of scientific development is a harmonious society. Such harmony is predicated on balance, which is economic, social - and demographic.

The author is research director of international business at India, China and America Institute (US) and visiting fellow at Shanghai Institutes for International Studies (China) and EU Centre (Singapore).

(China Daily 03/11/2013 page10)