Interesting article in today's Telegraph suggesting China may have big problems in a few years because of the demographic ticking time bomb.
Japan leads world in demographic decline
By Ambrose Evans-Pritchard in Tokyo
Last Updated: 12:12am BST 01/06/2007
Japan is slowly shrinking. Last year it became the first nation in modern history to tip over into outright demographic contraction, pioneering a path that will soon be followed by Italy, Germany, Spain, and most of Eastern Europe, with China close behind.
The population peaked at 128m in 2005 and is expected to fall below 100m by the middle of the century, when 36pc will be 65 or older. The dynamics of decline are already contaminating every aspect of the economy. The trend rate of growth has dropped to 1.5pc. The blistering 10pc pace of the early 1970s seems like a distant dream.
Wages have fallen for the last five months in a row, vastly complicating efforts to stave off deflation. Officials at the Bank of Japan blame the subtle effects of ageing. A bulge of baby-boomers is retiring at the top of the pay scale, to be replaced by younger workers - many on part-time contracts, at half the rate. Salaries have fallen 8pc over the past decade.
It will be much worse for China, where the workforce peaks in just eight years before plunging into the fastest downward spiral ever seen in peacetime. The one-child policy of 1980s and 1990s has already baked a population crunch into the pie, whatever is done now.
Dr Kwan Chi Hung, a fellow at the Nomura Institute and a top China expert, said the long-term prospects for China were "horrible".
advertisement"When Japan hit this problem it was already an advanced economy. China will still be poor. It only has 10 more years of strong economic growth and that is not enough," he said.
Mr Kwan estimates that China's development is 40 years behind Japan on most indicators, and its return on investment (incremental capital output ratio) is a dismal 4.4, far worse than those of Japan (3.2), South Korea (3.2), and Taiwan (2.7) during their growth spurts. "China is extremely inefficient because of the large state-owned sector," he said.
When the crunch comes around 2015, China's per capita income will be a sixth of Japanese and western levels. The society will turn grey before it escapes poverty.
This is small comfort for Japan, where a sense of foreboding about the demographic crisis colours all political discourse.
Prof Mariko Bando, the former chief of Japan's gender equality bureau, said the fertility rate had crashed to 1.26 from a stable level near 2 in the 1980s, far below the minimum reproduction rate. She said the plunge has been more extreme than in Europe (though Latvia and Estonia are comparable) because Japan had been so slow to embrace feminism.
"They never listened to the voice of women before, but the shock is now forcing Japan to respond," she said.
Women are silently protesting through refusal to have children under the existing social contract. "The ancien regime makes it very hard to have both a career and a family so women are putting off marriage. They are no longer willing to accept a double shift where they come home from work and have to do all the household chores," she said. Over 17pc in their 40s remain single.
"It's not so bad in the civil service, but business remains the last stand culturally for the Japanese man," she said.
The country faces a sort of fertility paralysis as men cling to the Confucian tradition that wives must serve their husbands, while women rebel. Parts of the ruling LDP (all male) party is having great difficulty coming to terms with this.
"Women have their proper place: they should be womanly," said LDP policy chairman Syoichi Nakagawa, right-hand man to premier Shinzo Abe.
"They have their own abilities and these should be fully exercised, for example in flower arranging, sewing, or cooking. It's not a matter of good or bad, but we need to accept reality that men and women are genetically different, " he said over breakfast in Tokyo.
Other parts of the Japanese government take a starkly different view, believing that the only way to prevent economic atrophy is to unlock female talent.
The cabinet office has pushed though affirmative action quotas designed to raise the number of women in public sector management jobs from 10pc to 30pc by 2020.
Maternity (or paternity) pay has been lifted from 25pc to 50pc of income, and leave has been extended from one year to 18 months. The waiting list for nurseries is being slashed.
The number of immigrants is creeping up too as the authorities quietly waive restrictions. Some 300,000 Brazilians of mixed Japanese ancestry have come, mostly to work in the Toyota factories of Nagoya. Phillipino migrants now tend the rice paddies and orchards, supposedly as student "trainees".
But they are not enough. "We need three million," said Fukunari Kimura, a professor at Keio University.
The once vast trade surplus has shrunk to 1.9pc of GDP as the economy matures. It will soon turn to deficit. For the next 30 years, Japan will slowly draw down its $1,800bn (£909bn) of net foreign assets, mankind's greatest stash of offshore wealth.
Decline may be unavoidable, but at least it will be graceful.
Here are the latest UN world population forecasts:
The interesting thing for me is that Asia (mostly, Japan is different) and Latin America are both now into the economically benign phase of th third demographic transition. But the time window is relatively short. By 2040 they are estimated to start the process of an ageing population.