BBL Seminar. Handout. September 12, CAI Fang. China s Demographic Change and Implications for Rest of the World"

Transcription

1 Research Institute of Economy, Trade and Industry (RIETI) BBL Seminar Handout September 12, 2011 China s Demographic Change and Implications for Rest of the World" CAI Fang

2 China's Demographic Change and Implications for Rest of the World CAI Fang Institute of Population and Labor Economics Chinese Academy of Social Sciences

3 Prologue Mainly talk about population trend & implications to China. For rest of the world, you may think of how to deal with the following trends 1. Labor-intensive industry moves to inland 2. labor cost hike reduces trade surplus 3. Catching up in technology & skills 4. Changing from producer to consumer

4 Demographic Transition in China

5 China Demographic Transition

6 Comparison of Total Fertility Rates World Developing Developed China Japan

7 New Prediction on Total Population 2035:

8 Prediction of Working Age Population Urban Rural 2022 Increase of WAP (mil.)

9 Vanishing Demographic Dividend Dependence ratio (%) Predic1 Predict2 Predict3

10 Labor Shortage & Wage Increase

11 Rapid Growth of Labor Demand Urban migrant workers Urban resident workers Urban employment (mil.)

12 Demand Grows Faster than Supply Employment growth rates (%) Secondary Tertiary % 9% 10% 11% Annual growth scenarios 8.3

13 Widespread Shortage of Migrant Workers

14 Wages Increases in All Sectors Grain Pig farm Coton Manuf. Construction Year Migrants Agricultural wages (yuan/day) Non-agricultural wages (yuan/month)

15 Supportive Policies for Wage Increase Efforts on income distribution Widening social security coverage Increasing minimum wages (13% annual growth for 12th Five-year Plan period) Labor market institutions (collective bargaining; workers biased judge in labor disputes)

16 Profit Drop Caused by 20% Increase in Labor Cost (SWS, 2010) environment protection cotton spinning coal mining road transport garm ent wool spinning passenger van consummer chemicals integrated circuit shipbuilding machine tool construction machinery heavy machinery meat product chemical agents port component airport railway transport water transport road and bridge Margin reduction effects by labor cost (%)

17 Impact on Trade Surplus According to economist at Deutsche Bank, increase in labor costs in laborintensive manufacture will generate similar effect as RMB appreciation. It is estimated that demographic factor will contribute half of the trade surplus reduction. In 2016, there will be no more surplus but deficit

18 Whither Labor-intensive Industries?

19 Neighboring Countries as Destinations China Vietnam India

20 Most Likely, Regional Flying Geese

21 Wages Differentials Will Exist 1300 JX QH 1200 GS SXX YN 1100 HLJ NMG HEN XJ 1000 SX GZ AH 900 GX SC HN 800 HB SD HUB FJ 700 BJ NX East Central West LN ZJ HAN CQ JL TJ JS SH GD

22 Age Structure of Agricultural Labor 40 over 50% % % % %

23 It Takes Time for Newcomers to Pick Up India 30% Iran 2% Turkey 2% Nigeria 3% Mexico 3% Pakistan 4% Indonesia 6% Philippines 2% Vietnam 2% Egypt 2% China 40% Bangladesh 4%

24 Industrial Transfer Has Happened 100% 95% 90% 85% 80% 75% 70% Distribution of Labor-intensive Manufacturing East Central West

25 Upgrading and Catching up

26 100% 80% 60% 40% 20% 0% TFP: Sustainable Source of Growth K L H DR TFP

27 Gap in Innovation: R&D Expenditure R&D as percent of GDP China High income Middle income Low income World average

28 Gap in Innovation: R&D Personnel China R&D staff per 1000 people High income Middle income Low income World average

29 Gap in Innovation: # of Patents Patents per mil. people China High income Middle income Low income World average

30 Huge Gap in Human Capital Years of schooling China USA Japan Age

31 Advantage of Backwardness Two definitions for globalization: (1) global expansion of trade, (2) globe-wide flows of knowledge/ideas China ends the former and begins to utilize the latter Implication for advanced countries is how technology can be bound with FDI

32 Migrants: Next Giant Consumer

33 Size and Composition of Migrants Migrant workers left home township for 6 months increase to 160 million in first half of 2011 and 2/3 are new generation (born after 1980s), who are better educated, earn more and consume more

34 Incomplete Urbanization Population share (%) Non-agr share Urban share

35 Migrants Insecure Employment Days-m Days-f Numbers Days Million

36 Low Coverage of Social Security Unemployment Basic medical care Work injury Maternity Basic pension Urban workers Migrant workers Coverage rates (%)

37 Institutional Potential of Consumption Yearly consumption (PPP$) The poor Off poverty Farmers Migrants Urbanites The rich

38 Thank you!