A major new report from BBC News suggests that “China’s economic model is in danger” due to its rapidly ageing population.
It reaches exactly the same conclusions as in our Boom, Gloom and the New Normal ebook. Chapter 6, published in November 2011 was titled ‘The Risks to China and India Growth’.
Now, what was often regarded as unthinkable is on its way to becoming mainstream. As the BBC website warns:
“Professor Cai Fang, a Chinese labour economist, estimates that the rapid decrease of the labour force will lower China’s annual growth rate by 1.5 percentage points from now to 2015, and it will decrease a further percentage point during the period from 2016-2020.
“China’s demographic dividend will end – the country’s fast economic growth in the past three decades has been mainly led by exports, which are dependent on an abundant and cheap labour supply.
“A fast decline of the labour force will cause shortages and a rapid increase in wages. Such changes will weaken the competitiveness of China’s export industries in the international market, affecting economic growth.
“China will need to undertake dramatic economic restructuring to deal with this problem.
“The rapid ageing process will also bring with it political difficulties. The legitimacy of Chinese communist party as a ruling group of the country since the Tiananmen Square massacre in 1989 has been based on its maintaining rapid economic growth.
“An economic slowdown could prompt challenges to party’s legitimacy.”
The BBC is rightly recognised as an authoritative and independent voice on economic issues. Their website contains enormous detail on the challenges now facing China.
Any executive whose business depends on China really owes it to themselves to view the BBC video above, and to study the detailed analysis on their website.
BBC News Warns On China’s Demographic Crisis
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