Stock Strategist

Demographics Will Weigh Heavily on China Over Next Decade

Daniel Rohr, CFA
Chokwai Lee, CFA

This article is the first in a four-part series on China’s next 10 years. Subsequent articles will discuss growth and productivity, rebalancing, and debt.

The influence of demography is often imperceptible quarter to quarter or year to year. But over the long term, it can prove decisive. For much of China’s past 30 years, demography aided extraordinary growth and supported an increasingly investment-heavy economic model. In the next 10 years, we expect demographic change will drag on growth rather than drive it and radically reshape China’s economy. The seemingly limitless supply of “surplus” rural labor, which fueled rapid urbanization and productivity gains, will begin to dry up. The working-age population will contract just as the senior population surges. China’s unusually high support ratio--the number of working-age adults for each child and senior--will collapse, draining the huge pool of savings that funds outsize investment outlays but stabilizing consumption growth as the overall economy slows. Below, we detail how changes to fertility, age composition, and urbanization will influence China’s economy in the decade to come.