From quantity to quality. Demographic transition in China – interview with Prof. Lauren Johnston

Patrycja Pendrakowska: What is the present demographic situation in China?

Lauren Johnston: The headline is that China is now in a period of population decline. But this is also a logical consequence and expectation of the reality that China imposed a One Child Policy for nearly four decades, from 1980. Moreover, China’s development strategy itself appears weighted for this period of demographic change, too.

What are the roots of this strategy?

In the times of Mao, in the 1950s and 1960s, the strategy was to populate the country with babies. However, by the time Deng Xiaoping came to power, he realised that if the children of the Mao era were also to have 3 to 4 (or more) offspring, there would be an even more immense problem with securing jobs and food for everyone in China. The one-child policy was first announced in 1980 and implemented until 2015. But there was much more that happened around it than just family planning – they designed a long-run economic development model to cope with this now relatively fixed demographic trajectory. Specifically, China realized in the mid-1980s that there was no feasible growth rate that could bring China to become per capita rich before it was demographically old. This left China to attempt to devise a strategy for long-run development that would account for this.

So, how did they answer this challenge?

First, in the 1980s incentives were introduced such that China would become the factory of the world. They had to provide jobs for all of those mostly not well-educated citizens, that is the Mao children born in the 1950s and 1960s. And this is arguably also one of the reasons for opening up to the world and encouraging investments from abroad. This is what begun at the end of the 1970s and unfolded in the 1980s and 1990s, when China ended its policy of economic autarky.

To sum up, what are the main factors steering the Chinese demographic policy?

Well, mainly a desire for Chinese people to live a high-quality life. The overall goal is to transition from a large poor population to a smaller better off one. As in any country, a high quality life means food, energy, labour and social securities and the long-run demographic policy targets that all Chinese will enjoy these to a good standard.

What does it mean in practice?

In sum, it means that the One Child Policy, at least in China’s coastal frontiers, was used to help transition from two ‘peasant’ parents to one graduate engineer or lawyer. This has been the broad process happening in China, even if the binary categories are not so clear or extreme. It may be that the next, smaller generation can read where their parents were not able to, as a more breadline example.

The important point is that as Mao’s babies retire, intensively from the 2020s, it is necessary that China’s economic model changes to enable the now fewer people of working-age to be able to realise their elevated productivity potential and hence compensate for the loss of working-age population numbers and share. What I want to emphasise here is that it was planned, not perfectly, but somewhat, so I don’t see that there is any crisis. It’s just not easy to bring about the change. But it has been known for decades that this would be the challenge for the 2020s. Basic demographic projections from the 1980s and China’s retirement age have pointed to this without much uncertainty.

What does it exactly mean to get rich before getting old in the case of China?

There are a couple of angles to this matter. First, Chinese policymakers looked at Japan, Singapore, Hongkong, where people got rich before they became old. And they got worried that maybe they will not get rich before they get old. But, they did not see a regional precedent for a country that got rich after getting old. It was not clear this would be possible, but China would need to forge such a pathway. To be honest, there was just no way that China could get rich before they got old. So, they designed this whole program to try to work around it, so that the next generation could get rich before old.

In other words, it did not come as a shock to Xi Jinping’s administration that people are ageing, and the population is declining.

This is what I mean. China knew it would need a more modest social security system than perhaps even its per capita income suggested – because China would still need to invest in its own development and not just in hundreds of millions of pensioners. What this means is that today in China, when you are old, on average at least, with the exception of some well-off urban workers you will not get a generous medical system and retirement plan. This means that you must also save privately during your working life and hope that your kids can get high performers so that they will get money and can support you in difficult moments. The way to secure their retirement was to use the most of their working age and also hope that their child is a high performer, or even able to secure a sufficiently elevated income to compensate for your own lower income from earlier times.

What is the current target for demographic planners?

First, they don’t want China’s total fertility rate to fall into the low-fertility rate trap and so they are seeking to set up tax incentives and to implement workplace changes that better support family life – especially of China’s graduate class who tend to have fewer children than those less educated. Otherwise, they also need to be creative to ensure that the needs of China’s of millions of pensioners can be met fairly too, but without bankrupting or derailing the economic modernization drive.

Supporting both of those agendas will also take economic reforms. China needs to ensure that its highest performing younger workers can realise their productivity potential – as engineers, as AI scientists and web developers, and so on. They need to make sure that talented young people from less-well-off backgrounds can afford a home near their workplaces, are able to send their child/ren to good public schools, and so on. Vested interests in elite urban frontiers can make this tricky, but those interests are also challenging overall productivity. A political economy tightrope.

Does the situation differ across China?

Certainly, Shanghai and Guangdong, Beijing – the rich urban frontiers, in these places most seniors have sufficient pension and medical services, but not in China’s poor hinterland. There needs to be redistribution but since pensioners seldom feel well-off it is difficult to take funds away even from China’s richer pensioners to help the very poor ones. The other thing is that a lot of the youth in the hinterland, rural areas especially, have moved to urban areas, so there are rural villages where elders are both poor and not well-serviced by any services like health and aged care.

In every transition, there are winners and losers. In your opinion, who is the winner of the transformation in China?

It’s difficult to say because everyone can perceive themselves as having a problem. Let me give a couple of examples. Let’s first analyse the older population. When you are old and in Beijing or Tianjin, there is a high chance that you are just fine. You probably have a middle-class pension, a child that is successfully middle class and married with their own family.

If you are a migrant millennial having moved to the city but your parents are rural and you need to support them, as well as house to buy – you sure have some pressure in modern China.

In my opinion, the luckiest is the urban and coastal educated GEN X – people born in the 70s. They made a career when China was opening in the 1990s. This means they were young enough to succeed in a more middle class and internationalising labour market, and buy housing when it was cheap too. Also China’s total fertility rate fell dramatically in the 1970s thanks to a deliberate family planning policy that was not as strict as the One Child Policy. This means that the people born in the 1970s have siblings so they are not as pressured in context of taking care of their parents, but not as many siblings as those born earlier – and hence they also faced less competition for their parents resources and also in education and society at large. They were able to ride a nice economic wave. They were lucky, but only if they were in coastal China and the big cities like Beijing and Nanjing.

So, what is the larger plan for China’s future?

China has realised the basic literacy of its working-age population, but it will take until the 2040s for the working-age population to be educated more like in a high-income country today. What that means, is that China plans to swap from a low-wage low-quality demographic dividend-led growth model up until recently, and now turn to capturing new human capital-related gains from its newly emerging more educated younger population. By the 2040s those educated gains will flatten out, and so by then they probably want a total fertility rate of closer to the replacement rate of 2.1. Then they will have something of a steady state economic – and demographic – equilibrium.

In other words, over the next 20 years, China will be swapping from ‘peasant’ (low education-based factory worker) to a more educated technical and university graduate worker. By 2040 most of Mao’s generation will have passed, and China will be a much more educated and well-off population whole, even if the total population is a bit smaller. It will be a smaller population but a richer people and perhaps even a bigger total GDP too.

Taking into consideration what you just said, what is the population target?

I am not sure there is one. Some estimates suggest that China’s population could call to 800 million or lower even. Earlier estimates suggested this number was the number of people China can easily provide food security for from domestic agricultural potential, but I don’t see this as their intended target. Either way, as the population declines somewhat over the next few decades, they will need to adjust the system to cater to the cointegration of economic and demographic change.

What are the challenges of the reduction strategy? Where does the imbalance lay?

At the margins there are some challenges that are a legacy of recent decades. First, due to the one-China policy, girl babies were discriminated against, which led to fewer girl births. Another problem is that boy children were most wanted by rural families and girl families were most retained by urban familes. The result is that while China famously is home to more men than women, what is lesser known is that the One Child Policy also was most strictly adhered to in urban areas – those that got richest and have the best schools – and these same areas were most likely to keep girl children. As a result, urban women in China today are almost an educated and prosperity class of their own relative to China’s hinterland. So you have the two socioeconomic extremes – rural males and urban elite females that are a challenge to social norms and pathways.

Does China plan to import migrants in the future?

There is no way in the nearer future for China to import a significant number of people. The only people that China might import are women from low-income countries due to a still remarkable imbalance between women and men, which means that some men in China can’t find a partner to start a family. That imbalance leads to importing women from neighbouring countries such as Cambodia or Myanmar, but some of these women are also victims of trafficking. But otherwise the whole point of China’s One Policy was to shift the population toward a smaller, better educated and more prosperous one – not to suddenly import foreigners to replace the ‘missing’ Chinese. This was a structural transition.

Is there something more that you would like to add?

Yes. As I know this article goes to the Polish audience. I wanted to add a reference to the CEE example, which was closely observed by Chinese policymakers and gives a counterexample. Most Eastern European countries are today high-income countries – but only after their populations old. That is, they got rich after they got old – which means unlike Japan, Singapore, Taiwan and Hong Kong, they present a model on a contrary foundation to the “Old Before Rich” story that China feared from the 1980s. They offer a precedent for the reality that countries can ‘get rich’ after getting old. And since many countries will need to work out how to get rich – after – getting old in future owing to the fact that the total fertility rate is tending to fall at lower per capita incomes than in the past and life expectancy increasingly similarly – this might even be a bigger useful precedent again. That is, how Eastern European countries prove that it is possible to keep getting more prosperous even amid intensive population ageing, might set a more important precedent.

Just to sum up, how would you conclude the current transition in China?

It’s about moving from quantity to quality. Moreover, I want people to consider that what we observe in China is a population reduction strategy paired with the socio-economic transition. In my view it’s not a crisis, but it is a very challenging transition.

***

Lauren Johnston is Associate Professor in the China Studies Centre at the University of Sydney.  Moreover, she is a Visiting Senior Lecturer, Economics & Policy, University of Adelaide.

The interview was originally published in Polish in Układ Sił Nr 41 (4/2023), and with the consent of Układ Sił and Lauren Johnston, we are now presenting it in English.

Photo: Pixabay

Lauren Johnston Associate Professor in the China Studies Centre at the University of Sydney. Moreover, she is a Visiting Senior Lecturer, Economics & Policy, University of Adelaide.