China And Demographics

Business, China, Company Strategy, Economics

OUR last four blog posts have focused on some of the big challenges confronting China’s economy over the next 12-18 months.

Today we again switch our focus to how major changes in demographics could adversely impact longer-term growth prospects.

 

By John Richardson

NanjingRoad.jpgCONTINUING high rates of urbanisation are constantly cited by chemical industry executives as a reason to be bullish over China’s long-term demand-growth prospects.

But urbanisation appears to be slowing down as a consequence of the huge shift that has already taken place of China’s rural population to its towns and cities.

“The number of workers migrating from the countryside to the cities peaked at 18m in 2008 and has averaged around 14-15m a year in the ten years that we have the data for,” said Dr Clint Laurent, general manager of Global Demographics – the Hong Kong-headquartered demographic and socio-economic forecasting service.

“The big surge in migration has involved 15-34 year olds as this age group has moved from planting rice to earning three times as much in the cities and the towns,” he added.

“This has decimated rural communities, dramatically reducing their fertility rates and therefore the number of new 15-year-olds coming through.

“As a result, the rural-urban migration will fall to just 4 million by 2032 – an insignificant number in a workforce the size of China’s.”

The disastrous one-child policy is China’s much-bigger demographic challenge.

“China needs to make the right policy choices in order to compensate for its one-child policy. There is, of course, a risk that it will make the wrong decisions,” continued Laurent.

One of the big challenges will be to meet the pension, and healthcare, liabilities of a rapidly ageing population.

“Over the next 20 years, the ratio of workers to retirees (presuming workers continue to retire at 60) will drop precipitously from roughly 5:1 today to just 2:1,” wrote Wang Feng, director of the Beijing-based Brookings-Tsinghua Center for Public Policy in the June 2012 issue of the online economic research publication, the China Economic Quarterly.

“China’s rapidly ageing population will have enormous economic and social implications. The demographic dividend China enjoyed over the past 30 years – especially in 1980-2000 – is now largely exhausted,” he added.

Between 15-25% of the country’s 1980-2010 GDP (gross domestic product) growth was the result of a favourable age structure, he said.

“As China’s demographic fortunes reverse, the economy will slow down regardless of other factors driving growth,” continued Wang.

And as Laurent also points out, chemicals and other companies need to respond to the changing nature of demand resulting from China’s huge demographic shift.

“If you’re the marketing director of Coca-Cola, Nike, Pepsi and Disney, or any other child brand, you have a problem over the next decade as the size of the market is going to shrink,” he said.

This also applies to the chemicals and polymer companies that supply raw materials to companies such as Coca-Cola, Nike, Pepsi and Disney.

As the population ages, there will also be a surge in demand for health and wellbeing products, added Laurent – creating a big opportunity for the chemicals industry.

PREVIOUS POST

China Politics

16/07/2012

In the last of our series of blog posts on some of the major challenges facing C...

Learn more
NEXT POST

Energy, Politics & Economics

18/07/2012

  Source of graph: http://thinkprogress.org/    By John Richardso...

Learn more
More posts
President Trump can only cause major economic damage by beating China, unless he has a time machine
12/09/2019

The views in this blog, are, as always, my own personal views and don’t reflect the views of I...

Read
Unsustainable boom in China auto market ends as sales of new vehicles move permanently lower
08/09/2019

By John Richardson THERE IS a big temptation when making forecasts of becoming too excited about the...

Read
Global PP demand could be 81.5m tonnes less than forecast in 2019-2028 as China Debt Supercycle ends
05/09/2019

By John Richardson SOME PEOPLE argue that despite the rapid rise in Chinese consumer debt over the l...

Read
China economic stimulus and PP: How global demand could have been 71m tonnes smaller
04/09/2019

By John Richardson CHINA came to the rescue of the global economy in 2009. This wasn’t for altruis...

Read
Hong Kong an example of rising political risk and the end of easy growth
02/09/2019

This blog expresses my opinions and not those of ICIS By John Ricuardson THE UNREST in Hong Kong wor...

Read
China imposes trade-war tariffs in US LDPE and raises tariffs on HDPE and LLDPE
27/08/2019

By John Richardson DON’T SAY I didn’t tell you. As I predicted, China has levied trade-war tarif...

Read
President Trump’s “better off without China” tweet not supported by the data
24/08/2019

The opinions in this blog post are, as always, my own and do not reflect the views of ICIS   By...

Read
How sustainability will upend the petrochemicals cost curve, creating new winners and losers
23/08/2019

By John Richardson THE FUTURE I described on Wednesday, of declining petrochemicals and polymers dem...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more