Implications: rapid population aging. 1-child policy means that cost of pensions, health care, and social services will thus rise.

• 1 in 6 now above 60
• 1 in 4 above 2030
• 1 in 3 by 2050

“get old before getting rich”

demography

1980-2010

• low dependency ratios
• high household savings rate
• large lavor supply
• “age of abundance”

decline

• rapidly aging population
• rapidly rising dependency ratios
• ageing population / rising health / retirement costs
• shrikning labor force, rising wages
• declining of deposits in bank system
• less capital

resulting dynamics

• labor force shrinking by 2 million workers per year
• manufacturing wages rising faster
• labor cost advantage almost gone

wages keep going up

health

• improved health => living longer
• china’s life expectancy is around 80ish yo

people are living longer…

Savings Rate

People have decreasing savings rate; so when people can’t feed their parent, government can’t really step in correctly because the social safety net is not completely setup.

• projections of consumption vs savings level increased aging
• household surplus devoted to savings will disappear by 2035

China’s preparation

• growth model focused on investment in physical infrastructure, and insufficient in education / health
• consumption unusually low as contirbutor to GDP
• limited investment in social programs and social expenditures (e.g., education, health, retirement)

implications

• households cannot transfer income from young to old
• government must take up slack, but they don’t have ability; pressure for change in growth model
• pressure to change tax system to raise ventures
• constrained spending on geopolitical ambitions

education

Well-educated population is essential for economic development.

1. STEM field innovation (economics and finance)
2. literacy and numeracy is essential for shift from low-wage to high-wage
3. to move into innovative, productivity driven growth that moves economies form middle income to high income

Korea Taiwan Israel Ireland Spain Singapore moved up across middle income trap; but other fall. China does very well in Elite education, but poorly for broader population.

Education quality

• Chinese students scores very very well
• metrics are only BSJZ (i.e. no rural provinces)