July 31, 2008

Superpower China in spite of aging population and pollution

The Washington Post had an article forecasting problems for China because of an aging population and too much pollution. Those are problems but they are not automatic killers of economic progress.

The Ukraine has had 7% GDP growth in spite of low birth rates and an average of 39.6 and a falling population. The population 65 years and over was already 16.6% in 2006.

China has a median age of 33, a higher birth rate and slightly increasing population. China 65 years and over population is 7.7% in 2007.

china's 2030 population is expected to be 1.6 billion The population in 2040-2050 could stabilize at around 1.5 billion to 1.6 billion. This means the over 65 population would be around the current level of the Ukraine. 334 million over 60 in 2050 and 100 million age 80 or older. So 230 million between 60 and 80. Assuming an even distribution. 57 million would be between 60 and 65. The over 65 level would be 17-18%.

The one child policy is already getting weakened, so China will likely see a moderate increase in birth rates between now and 2050.

China's currency will likely strengthen to the level of its calculated purchasing power parity

The International Monetary Fund forecasts that China will be at $9730 per capita PPP GDP in 2013. There are no forecasts for China's economic wheels to come off in the next 5 years. China would then be near the per capita wealth of the Ukraine ($10868) and still be at an average younger age with better demographics.

Air Pollution in England and The United States in 1950s and 1960s
There were substantial air inversions where air pollution killed hundreds and even thousands in New York and London during the 1950's and 1960s

In the United States between 1970 and 2006, citizens enjoyed the following reductions in annual pollution emissions:

carbon monoxide emissions fell from 197 million tons to 89 million tons
nitrogen oxide emissions fell from 27 million tons to 19 million tons
sulfur dioxide emissions fell from 31 million tons to 15 million tons
particulate emissions fell by 80%
lead emissions fell by more than 98%

This means that the USA had two to five times worse for most air pollutants in the 1950s and 1960s.

During the 1950's and 1960s the USA had higher economic growth.

Air pollution is bad. This site is not arguing in favor of air pollution. However, the reason to stop air pollution is to save in China's case 1-2 million lives per year and improve the health and lower the medical costs of those made sick by air pollution.

China is making large investments in cleaning up its environment and energy sources.

China efforts for an improved environment are substantial

China's 2020 energy source mix should be similar to the current energy mix in the United States (50% coal for electricity, the rest not coal with a lot of hydro, nuclear and wind.)

By 2020, China will be around the per capita economic level of todays Poland up to the level of Portugal.

So the statements that China will have too large an aging population before it becomes wealthy enough to handle it do not hold up to analysis.

China is not guaranteed to succeed, but the problems that they face are not insurmountable.

Latest economic projection for China by this site

Details coal related mass deaths from the London fog and the Buffalo Creek mountain top removal sludge dam break.


kurt said...

I've been to Shanghai and Beijing. Sure, the pollution is bad, but I think the U.S. pollution was worse when I was a kid in the early 70's.

The aging population problem is a farce. An aging population simply makes it easier to implement free-market reforms and shut down all of state owned enterprises (SOEs) without generating huge amounts of unemployment.

Besides, by 2050 biotech should have put paid to the aging process.

Brock said...

A few comments:

1. In the knowledge economy, an aging population is helpful in the earlier stages. All things being equal, 40 year-olds are far more productive (per capita) than 25 year-olds. So the per capita numbers from Ukraine and China are expected. It's when more and more people hit retirement that you expect problems.

I don't think China will have problems in this regard (I think SENS will work before that), but I just wanted to point this out.

2. In my view, China's biggest hurdles are political, rather than demographics, economics or pollution. Consider that recently China has been cutting back on granting visas, even to businessmen who have invested lots of money in China. When push comes to shove, the Communist Party cares more about maintaining political power than it does about economic growth.

Further China has a history of breaking up into multiple states and cutting off contact with the outside world. I don't know what the odds are of either of those scenarios, but it's something to keep in mind. I wouldn't be surprised though if Shanghai and Hong Kong/Guangzhou (whether independently or in a coordinated manner) decide they've had enough of Beijing's central authority and can do better on their own.

bw said...

I agree that improving age related medicine which creates the longer lifespans which means there are more older people will also mean that older people will be more active and healthier.

The "Aging problem" just means that any retirement age will have to be shifted to older and older ages. Instead of a COLA (cost of living adjustment for inflation compensation) there will need to be a longevity adjustment to any retirement age.

I see China's leadership having fewer issues renegotiating any social contracts like retirement and pensions than western countries.

I am also very sure that China will start having more kids. The predictions of unbreakable trends in demographics are the same ones that predict the extinction of Italians, Russians and Ukranians because of current negative population growth.