August 2, 2012

Demography: China's Achilles Heel

Demography: China's Achilles Heel
“China is not unique in facing these problems. All rich countries have rising pension costs. And China has some advantages in dealing with them, notably low tax rates (giving room for future increases) and low public expectations of welfare. Still, China is also unusual in two respects. It is much poorer than other ageing countries, and its demographic transition has been much more abrupt. It seems highly unlikely that China will be able to grow its way economically out of its population problems. Instead, those problems will weigh down its growth rate—to say nothing of the immense social challenges they will bring. China's Achilles heel will not be fatal. But it will hobble the hero.”

Comment: This is a very good, concise article on the impact demographic trends in China will have on the country’s future. The short story is captured in the phrase “China will get old before it gets rich.” The underlying argument here is one of the many reasons I remain optimistic about America’s future. While we certainly have problems their severity is mitigated by relative condition of the rest of the world and especially the condition of our principal competitors. For a broader historical discussion see: Demography is Destiny.

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