Demographic dividend and prospects for economic development in China

Type Conference Paper - United Nations Expert Group Meeting on Social and Economic Implications of Changing Population Age Structures
Title Demographic dividend and prospects for economic development in China
Publication (Day/Month/Year) 2007
During the last 25 years, the People’s Republic of China has undergone demographic as well as
economic changes of historic proportions. Demographically, China has transformed itself from a
"demographic transitional" society, where reductions in mortality led to rapid population growth and
subsequent reductions in fertility led to a slower population growth, to a "post-transitional" society, where
life expectancy has reached new heights, fertility has declined to below-replacement level, and rapid
population ageing is on the horizon. In the not-too-distant future—in a matter of a few decades—China’s
population will start to shrink, an unprecedented demographic turn in Chinese history in the absence of
major wars, epidemics or famines. In this process, China will also lose its position as the most populous
country in the world.
Economically, China has completed its transition from a socialist, centrally-planned economy to a
market-based economy. From a socialist economy that was closed to the outside world and plagued by
low efficiency and stagnation, China has become, in the last two decades¸ one of the most dynamic and
fast- growing economies in the world. In less than twenty years' time, between 1982 and 2000, China’s
real GDP per capita, as adjusted for purchasing power parity (PPP adjusted), quadrupled – a record
unmatched elsewhere in the world.1
At the start of these historical transformations, China's leaders adopted the improvement of the
standard of living of the Chinese population as its new political mandate and the basis for political
legitimacy. They accordingly formulated two basic national policies: (i) developing the economy and (ii)
controlling population growth. The Government of the People’s Republic of China announced its onechild-per-couple
policy in 1980, an unprecedented act of governmental intervention in population. Such
an extreme policy came about even though the fertility level in China had already more than halved
during the previous decade, and was already at a level not much above the replacement level (Lee and
Wang, 1999; Wang, 2005).
The rationale for China’s one-child policy was a neo-Malthusian perspective on the relationship
between population and development—a view largely dismissed by mainstream economists. While the
architects of China’s population policy could argue that the country’s remarkable post-reform economic
record presents an evidence of the success of the policy, this assertion could be questioned on two
grounds. The first is the extent to which the transition to low fertility was accelerated by the one-child
policy (Wang, 2005). The second, which is considered in this paper, is the extent to which the decline in
fertility, the slowdown in population growth, and the changes in age structure contributed to China’s
economic success. In light of the recent and future changes in China's age structure, the paper shall also
examine and prognosticate on how changes in China’s population age structure can affect the country’s
prospects for economic development during the rest of the twenty-first century.
This paper is organized as follows. The first section reviews briefly the recent and projected changes
in China’s population age structure. The second and third sections evaluate the impact of changes in the
age structure on China’s economy in the past two decades and in the near future, respectively. The
evaluations are based on calculations of two types of demographic dividends: (i) a dividend associated
with a relative increase in the population of the labour force age due to fertility decline and (ii) a dividend
associated with population ageing (Mason and Lee, forthcoming; Wang and Mason, 2004).

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