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China’s Demographic Dividend

China’s Demographic Dividend. The possible benefits of TEMPORARY Population Growth Spurt. What drives China’s Growth?. Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization. Reform and Restructuring.

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China’s Demographic Dividend

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  1. China’s Demographic Dividend The possible benefits of TEMPORARY Population Growth Spurt

  2. What drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  3. Reform and Restructuring From Communist to Socialist with Chinese Characteristics From Central Planning to Market Driven Economy From Closed-Door policy to Open-Door Policy From Dictatorship to “Centralized Democratic” Decision Making Privatization

  4. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  5. What Drive China’s Growth? Urbanization -- 1.5 million per month Industrialization -- Raise productivity -- Monetize economic activities

  6. Urban / Total Population Source: United Nations, CLSA Asia-Pacific Markets

  7. http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?_r=0http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?_r=0 http://www.nytimes.com/video/world/asia/100000002279849/in-china-a-staggering-migration.html

  8. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  9. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  10. Background this and next 3 slides

  11. The demographic dividendExplained in 4 parts Part 1: Preliminary Steps • Country enters stage 2 of Demographic Transition • Results in large increase of children • Dependency ratio increases • Little to no change in elderly population life expectancy

  12. Part 2: Window of opportunity opens Mechanics of situation • Country enters stage 3 of Demo. Trans. • Children decline as proportion of population (see diagram) • Dependency Ratio declines • Little to no change in elderly proportion Worker bulge appears (see diagram) Wise Country follows pro-development policies • Moves to creates Employment opportunities • Pursues international export strategy

  13. Part 3 Dividend Period • For about a generation the country rapidly grows and prospers • Workers support fewer dependents and tend to invest their growing surplus • Country’s policies insure ample employment, investment opportunities, and greater consumption

  14. Part 4 Window closes – but country developed • After a generation workers age and begin to retire • Stage 4 of Demographic transition entered • Dependency ratio climbs based mainly on elderly (see diagram) • As Dividend ends • Growth of economy slows but continues

  15. Countries at various parts of the Demographic Dividend

  16. The demographic dividend in words The demographic dividend is a window of opportunity in the development of a society passing through the demographi transition that opens up as fertility rates decline when faster (super charged) rates of economic growth and human development are possible when combined with effective policies and markets. The drop in fertility rates often follows significant reductions in child and infant mortality rates, as well as an increase in average life expectancy.

  17. The demographic dividend in words The demographic dividend is a window of opportunity • fertility rates decline due to economic growth • Demographic transition heads into stage 3 and eventually stage 4 • Super charged development possible when increased labor combined with effective policies and markets. • The drop in fertility rates follows reduced child/ infant mortality rates, • and increase in average life expectancy.

  18. As women and families realize that fewer children will die during infancy or childhood they will begin to have fewer children to reach their desired number of offspring. However, this drop in fertility rates is not immediate. The lag between produces a generational population bulge that surges through society. At first for a period of time this “bulge” is a burden on society and increases the dependency ratio (more kids). Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall (headed towards stage 4 of Demo. Trans.) and older generations having shorter life expectancies, the dependency ratio declines dramatically.

  19. This demographic shift initiates the demographic dividend. With fewer younger dependents, due to declining fertility and child mortality rates, and fewer older dependents, due to the older generations having shorter life expectancies, and the largest segment of the population of productive working age, the dependency ratio declines dramatically leading to the demographic dividend. Combined with effective public policies this time period of the demographic dividend can help facilitate more rapid economic growth and puts less strain on families. This is also a time period when many women enter the labor force for the first time.[1] In many countries this time period has led to increasingly smaller families, rising income, and rising life expectancy rates.[2] However, dramatic social changes can also occur during this time, such as increasing divorce rates, postponement of marriage, and single-person households.[3]

  20. China: End of Demographic Dividend China’s Case One Child Policy More Kids Dip More Elderly

  21. Following Japan & China Peak Years of “Cheap” Workers

  22. “Scissors” crisis of aging What’s happening here?

  23. Dependency Ratio Old Kids

  24. Replace Brawn with Brains?

  25. Demography and Education Demography Dividend College Enrollment China’s Baby-boomer Generation Young and Educated With money, Will spend

  26. Brain power: US vs China Science and engineering PhDs Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets

  27. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  28. Saving is Virtue! Total Household Deposit in China US$5.13 Trillion Total Deposit Waiting to make deposit

  29. Household Savings / Disposable Income Higher Savings Ratio, Higher Capital Formation, Higher Growth Rate Source: Euromonitor, CLSA Asia-Pacific Markets

  30. What Drives China’s Growth? • Reform and Restructuring • Urbanization and Industrialization • Demography Dividend and Education • Savings and Capital Formation • Globalization

  31. Globalization China Accounts for 10% of Global Trade

  32. Drivers for the Growth in Next Decade? • Reform and Restructuring should continue, but no more low hanging fruits • Urbanization and Industrialization another two decades to go • Demography Dividend and Education no more labor growth, productivity to go higher • Savings and Capital Formation need less savings to drive domestic consumption • Globalization slower export growth, trade balance

  33. No More Double Digit Growth

  34. But, Power of Compounding

  35. Uneven Spatial Development

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