Last week, China celebrated the 100th anniversary of the founding of the Chinese Communist Party. The occasion was marked by extensive celebrations across the nation and receptions world-wide at its embassies and consulates.
This anniversary was also marked by deep reflections by Sino specialists around the world. It seems they are drawing attention to the beginning of a new phase in China’s policy towards the rest of the world and a series of important questions about domestic issues and the role of the party.
Central to all of this is the fact that the China’s demographic structure is undergoing a significant change. China’s population is aging faster than almost any other country in modern history. By 2050, the proportion of people over the retirement age will be more than 39% (more than 500 million) of the total population. Current demographic trends could hinder economic growth and create changing social problems.
The policy limiting couples to only one child that was initiated in 1979 has been terminated since birth rates and population growth declined sharply. Couples may now have two or even three children. But more than a quarter century of limiting couples to one child has had several untoward effects.
First the ratio of male to female citizens, the most skewed in the world, favours males by 3 to 4%. Traditional Chinese communities,
particularly in rural areas, favoured males and this resulted in high female abortion rates in the 80s and 90s. This disparity has now led to a decline in marriage rates and birth rates.
Rapid population aging could create social problems and increase the risk of social instability. For example, given the decline in the birth rate and the simultaneous increase in life expectancy, the dependency ratio in 2050 will be twice as high as it was in 2015. That means instead of 8 workers per retiree it will be only 2. Were that not bad enough, most potential gains in productivity (from improved education, increased urbanization not to mention adopting new technologies making manufacturing more efficient) have already been realized. In short, it will be very much harder to attain future gains equivalent to those in the period between 1980 and 2020.
The Communist Party is a minority, involving about 9.1% of the population. It has ruled supreme with little resistance in the last 40 years as personal incomes have risen. There was an implicit deal that the Party could rule as long as the economy continued to grow. But that implicit agreement will be strained as time goes on. Remember that President Xi considers preserving the Communist Party as his most important priority.
Anticipation of slower economic growth may also be the major motivation behind President Xi’s current domestic policies.
He is waging a strong campaign against corruption because dealing with corruption successfully will yield great benefits in efficiency and productivity.
It also accounts for his increasing intolerance of those who dissent from his actions, as clearly illustrated in the pressures on Hong Kong and in western China on the Muslim population.
But it also is the motivation for strong reactions of the regime to criticism from abroad. Blunting such criticism is having a pronounced positive impact on the average Chinese citizen who takes increasing pride in China’s economic growth and increased political power.
Social change as well as well as significant demographic shifts take time and are hard to recognize in the short-run. Xi understands this and is using all the instruments of governance to avoid that potential domestic instability that could occur as growth slows.
About 25% of China’s population has little, if any, experience with poverty or periods of economic hardship and this proportion of the population will grow in importance over time. No wonder that Xi is acting as he does.
Whether both the Party and the nation as a whole will change over time will be a
dominant question in the next three decades. We need to consider this reality in formulating our own policy in dealing with China.
David Bond is a retired bank economist who lives in Kelowna.