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China’s Demographic Dividend. What drives China’s Growth?. Reform and Restructuring Urbanization and Industrialization Demography Dividend and Education Savings and Capital Formation Globalization. Reform and Restructuring. From Communist to Socialist with Chinese Characteristics - PowerPoint PPT Presentation
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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 RestructuringFrom Communist to Socialist with Chinese CharacteristicsFrom Central Planning to Market Driven EconomyFrom Closed-Door policy to Open-Door PolicyFrom Dictatorship to “Centralized Democratic” Decision MakingPrivatization
What Drives China’s Growth?
• Reform and Restructuring• Urbanization and Industrialization• Demography Dividend and Education• Savings and Capital Formation• Globalization
What Drive China’s Growth? Urbanization
-- 1.5 million per month
Industrialization
-- Raise productivity
-- Monetize economic activities
Urban / Total Population(%) 2000 2005 2010 2015 2020 2025 2030
Australia 87.2 88.2 89.1 89.9 90.6 91.3 91.9
China 35.8 40.4 44.9 49.2 53.2 56.9 60.3
Hong Kong 100 100 100 100 100 100 100
India 27.7 28.7 30.1 31.9 34.3 37.2 40.6
Indonesia 42.0 48.1 53.7 58.5 62.6 65.9 68.9
Japan 65.2 66.0 66.8 68.0 69.4 71.1 73
Korea 79.6 80.8 81.9 83.1 84.2 85.2 86.3
Malaysia 62.0 67.6 72.2 75.7 78.5 80.5 82.2
Pakistan 33.2 34.9 37.0 39.7 42.8 46.3 49.8
Philippines 58.5 62.7 66.4 69.6 72.3 74.6 76.7
Singapore 100 100 100 100 100 100 100
Thailand 31.1 32.3 34.0 36.2 38.9 42.2 45.8
Vietnam 24.3 26.4 28.8 31.6 34.7 38.1 41.8
Asia 37.1 39.7 42.5 45.3 48.1 51.1 54.1
US 79.1 80.8 82.3 83.7 84.9 86.0 87.0
Latin America 75.3 77.5 79.4 80.9 82.3 83.5 84.6
Western Europe 75.3 76.1 77.0 78.0 79.1 80.4 81.7
Source: United Nations, CLSA Asia-Pacific Markets
http://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
What Drives China’s Growth?
• Reform and Restructuring• Urbanization and Industrialization• Demography Dividend and Education• Savings and Capital Formation• Globalization
What Drives China’s Growth?
• Reform and Restructuring• Urbanization and Industrialization• Demography Dividend and Education• Savings and Capital Formation• Globalization
Background this and next 3 slides
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
Part 2: Window of opportunity opensMechanics 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 proportionWorker bulge appears (see diagram)Wise Country follows pro-development policies •Moves to creates Employment opportunities•Pursues international export strategy
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
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
Countries at various parts of the Demographic Dividend
The demographic dividend in words
The demographic dividend is a window of opportunity in the development of a society or nation that opens up as fertility rates decline when faster 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.
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. For a period of time this “bulge” is a burden on society and increases the dependency ratio. Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall and older generations having shorter life expectancies, the dependency ratio declines dramatically.
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]
End of Demographic Dividend
More Kids Dip
One Child Policy
More Elderly
China’s Case
Following Japan
Peak Years of “Cheap” Workers
“Scissors” crisis of aging
Dependency Ratio
Kids
Old
Replace Brawn with Brains?
Demography and EducationDemography Dividend
China’s Baby-boomer Generation
Young and Educated
With money, Will spend
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
New ly enrolled Fresh graduates
mnCollege Enrollment
Brain power: US vs China
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1999 2000 2001 2002 2003 2004 2005 2006 2007
USA China
(No.) Science and engineering PhDs
Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets
What Drives China’s Growth?
• Reform and Restructuring• Urbanization and Industrialization• Demography Dividend and Education• Savings and Capital Formation• Globalization
Saving is Virtue!
Waiting to make deposit
Total Deposit
Total Household Deposit in China US$5.13 Trillion
Household Savings / Disposable Income
0 10 20 30 40
USA
Philippines
J apan
Taiwan
Australia
Thailand
Indonesia
South Korea
Malaysia
India
Hong Kong
Singapore
China
(% )
Source: Euromonitor, CLSA Asia-Pacific Markets
Higher Savings Ratio,
Higher Capital Formation,
Higher Growth Rate
What Drives China’s Growth?
• Reform and Restructuring• Urbanization and Industrialization• Demography Dividend and Education• Savings and Capital Formation• Globalization
Globalization
China Accounts for 10% of Global Trade
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
No More Double Digit Growth
0
2
4
6
8
10
12
14
16
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
GDP grow th
%
But, Power of Compounding
0
5000
10000
15000
20000
25000
30000
US
$ B
illi
on
Year
GDP Comparison
China
US
India
Key Assumption China India U.S.
Real GDP 7% 6% 2%
Inflation 3% 4% 2%
Currency Appreciation 2% 1%
Uneven Spatial Development