Chart of the Day: Demography, China’s Achilles heel

This chart comes from the Economist where they write:

Over the past 30 years, China’s total fertility rate—the number of children a woman can expect to have during her lifetime—has fallen from 2.6, well above the rate needed to hold a population steady, to 1.56, well below that rate (see table). Because very low fertility can become self-reinforcing, with children of one-child families wanting only one child themselves, China now probably faces a long period of ultra-low fertility, regardless of what happens to its one-child policy.

The government has made small adjustments to the policy (notably by allowing an only child who is married to another only child to have more than one child) and may adapt it further. But for now it is firmly in place, and very low fertility rates still prevail, especially in the richest parts of the country. Shanghai reported fertility of just 0.6 in 2010—probably the lowest level anywhere in the world. According to the UN’s population division, the nationwide fertility rate will continue to decline, reaching 1.51 in 2015-20. In contrast, America’s fertility rate is 2.08 and rising.

Bottom line: The demographic trend in China will have profound economic and social consequences. China will grow old even before it becomes rich. What is that going to do to the so-called savings glut in China given the need for re-balancing away from an economy dependent on capital spending? Nothing good, I say.

Much more here:

Source: China’s Achilles heel – The Economist

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.