1. China’s Demographic Dividend
The possible benefits of TEMPORARY Population Growth

2. What drives China’s Growth?
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization

3. Reform and Restructuring
From Communist to Socialist with Chinese Characteristics
From Central Planning to Market Driven Economy
From Closed-Door policy to Open-Door Policy
From Dictatorship to “Centralized Democratic” Decision Making
Privatization

4. What Drives China’s Growth?
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization

5. What Drive China’s Growth?
Urbanization
million per month
Industrialization
-- Raise productivity
-- Monetize economic activities

6. 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
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
62.7
66.4
69.6
72.3
74.6
76.7
Singapore
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
42.5
45.3
51.1
54.1 US
79.1
82.3
83.7
84.9
86.0
87.0
Latin America
75.3
77.5
79.4
80.9
83.5
84.6
Western Europe
76.1
77.0
78.0
80.4
81.7
Source: United Nations, CLSA Asia-Pacific Markets

8. What Drives China’s Growth?
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization

9. What Drives China’s Growth?
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization

10. The demographic dividend Explained 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

11. Part 2: Window of opportunity opens
Mechanics 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 proportion
Worker bulge appears (see diagram)
Wise Country follows pro-development policies
Moves to creates Employment opportunities
Pursues international export strategy

12. Part 3 Dividend Period
For about a generation the country rapidly grows and prospers
Workers support fewer dependents
Country’s policies insure ample employment, investment opportunities, and greater consumption

13. 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

14. Countries at various parts of the Demographic Dividend

15. 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.

16. 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.

17. This demographic shift initiates the demographic dividend
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]

18. End of Demographic Dividend
China’s Case
One Child Policy
More Kids Dip
More Elderly

19. Following Japan
Peak Years of “Cheap” Workers

20. “Scissors” crisis of aging

21. Dependency Ratio
Old
Kids

23. Replace Brawn with Brains?

24. Demography and Education
Demography Dividend
College Enrollment
China’s Baby-boomer Generation
Young and Educated
With money, Will spend

25. Brain power: US vs China
Science and engineering PhDs
Source: National Science Foundation, China National Bureau of Statistics, CLSA Asia-Pacific Markets

26. What Drives China’s Growth?
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization

27. Saving is Virtue! Total Deposit Total Household Deposit in China
US$5.13 Trillion
Total Deposit
Waiting to make deposit

28. Household Savings / Disposable Income
Higher Savings Ratio,
Higher Capital Formation,
Higher Growth Rate
Source: Euromonitor, CLSA Asia-Pacific Markets

30. What Drives China’s Growth?
Reform and Restructuring
Urbanization and Industrialization
Demography Dividend and Education
Savings and Capital Formation
Globalization

31. Globalization
China Accounts for 10% of Global Trade

32. 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

33. No More Double Digit Growth

34. But, Power of Compounding
Key Assumption
China
India
U.S.
Real GDP 7% 6% 2%
Inflation 3% 4%
Currency Appreciation 1%

35. Uneven Spatial Development