TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

The Economist reports that over the last thirty years, China’s fertility rate (the number of children a woman can expect to have throughout her life) has fallen from 2.6 to 1.56. This means China’s population will peak sometime around 2026 and then begin to decline. Worse, though, their population will continue getting older:

The differences between the two countries are even more striking if you look at their average ages. In 1980 China’s median (the age at which half the population is younger, half older) was 22. That is characteristic of a young developing country. It is now 34.5, more like a rich country and not very different from America’s, which is 37. But China is ageing at an unprecedented pace. Because fewer children are being born as larger generations of adults are getting older, its median age will rise to 49 by 2050, nearly nine years more than America at that point. Some cities will be older still. The Shanghai Population and Family Planning Committee says that more than a third of the city’s population will be over 60 by 2020.

Think about that. China is a developing (that is, still relatively poor) nation with an average age comparable to developed (rich) nations, and it will only get older in the coming decades. This means two things: first, China’s cheap labor advantage—which was largely responsible for China’s remarkable record of economic growth since the 1980s—will dry up as their youth decline as a percentage of population; and second, their aging population will require significant financial support. Traditionally, this support comes from the elderly’s children, but because the country’s birth rate is declining, they will be less able to do so.

In other words, China is growing old before it grows rich. That presents profound challenges both for China1 and the rest of the world2.

1. How do they quickly move from an unskilled labor-fueled economy toward a more productive, value-add economy? do they import workers to help augment their declining workforce? If so, how do they adapt their rather exclusionary society to help integrate workers? As economic growth inevitably slows, how will they decide to split up limited funds between government interests and costs for supporting the elderly? [↩]
2. As China’s ability to manufacture products cheaply declines, consumer product prices could rise as a result—which means that unless wages increase commensurately, consumers will face lower real wages. China’s rise has effectively subsidized the poor and middle class in the U.S. and Europe by making goods cheaper. [↩]