Economics

Department of Humanities and Social Sciences, IIT Kanpur

Changing Population of China and its impact on future economy and society of China- A Demographic comparison with India
Ved Prakash, M.Sc. Mathematics, Indian Institute of Technology, Kanpur

Abstract: China had a population of just 694,581,759 in the year 1964 and a GDP measure of216462 Million US Dollar in 1978.But today China has a population of 1.34 Billion and a GDP of 7321508 Million US dollar. Population explosion in China was an outcome of high economic growth as well as a reason of heavy profits and surpluses of manufacturing industries in China. Through this paper I Intend to compare the similar relation among other countries like Japan and Sweden. Aging population brings the availability of cheap labor down and hence impacts the economic performance of countries. I will examine fertility and mortality and age structure pattern of population in China and conclude that Aging population is one of the reason of China’s declining economic growth.

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Introduction China today is the most populated country in the world and the second strongest economy. China had a small population of 694,581,759 in 1964. After the economic reforms of 1979, Chinese economy was rising and families were prospering which led to high fertility rate in China and China’s population started growing at striking rate (TFR = 5.512 in 1970). The high number of Children in China who became young and entered labor force in the years starting from 1990 provided availability of cheap labor for industries, especially manufacturing industries. China’s export encouraging economic policies led to cheap exports for the world created heavy surpluses for the government and led China to become the second largest economy in 2009. I try to answer question through my research, which are as follow: Question 1: How changes in fertility and mortality in China changing China’s age structure? Question 2: What effect China’s aging population will have in China’s social and economic conditions? Question 3: What can be done now to tackle the problems that are being created by changing age structure in China? Question 4: What needs to be done in India to bring down the rate of population growth and improve other demographic indicators? The reason this study is important is because a high population is like a hidden power, it has both positive effects as well as negative. If used correctly, then it can lead to development like in case of China and if mishandled can lead to economic and political instability. Most of the population of the world is concentrated in developing nations. If mixed with proper policies of human development, then these populations could find a way to high economic growth and better lives through their changing age structures. The outcomes of this study might help other nations in managing human development policies and also help Chinese Government to make batter policies and support for its own economy and for those who are getting old in China.

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Literature Review

The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change by David E. Bloom, David Canning and Jaypee Sevilla. This paper discusses various theories related to connection between population and economic growth in detail. • The “Pessimistic” Theory: Population Growth Restricts Economic Growth The “pessimistic” theory traces its lineage to Thomas Malthus. Writing in the 1790s, Malthus asked whether “the future improvement of society” was possible in the face of ever larger populations. He reached his famously dismal conclusion: “Taking the population of the world at any number, a thousand millions, for instance … the human species would increase in the ratio of 1, 2, 4, 8, 16, 32, 64, 128, 256, 516, etc. and subsistence as 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc. In two centuries and a quarter the population would be to the means of subsistence as 512 to 10; in three centuries as 4096 to 13, and in two thousand years the difference would be incalculable”(Malthus, 1798). He was not the only one who wrote about pessimistic view of population expansion. In year 1968, Paul Ehrlich came with is book, “Population Bomb”, where he declared that “In the 1970s hundreds of millions of people are going to starve to death” (Ehrlich, 1968). This view has always remained with the world and resulted in introduction of family planning policies thinking that reduced growth of population will result in increased growth of economy. One more pessimistic view is that even if world witness’s period of intensive economic growth, it will be consumed to sustain the increased population growth. So the living standards would never improve. The “Optimistic” Theory: Population Growth Can Fuel Economic Growth There are a different set of people who believe in the great power that population brings along. The population of the world has doubled in last 40 years but along with that average incomes have also increases by two- third. As Paul Ehrlich declared, “millions of people” didn’t die. In fact, most of the technical and social innovations have come in last 30 years, which is faster than any other period of time. As pressure on natural resources increased, innovative technologies to obtain more from fewer resources came up. Green revolution is one such example where agriculture produce increased by 4 times with just 1% extra land utilization. The “Neutralist” Theory: Population Growth Has No Significant Effect on Economic Growth More recently the neutral view towards population growth and economy has come up saying that population has very insignificant effect on economic growth. Adam Smith, in his book
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analyzed that growth is decided by distribution of labor and other factors. Countries where skills of worker were directed towards special division of work developed faster than other. Other factors like investment in human capital, openness to trade, economic policies played much more important role in economic growth. On carrying out regression between economic growth rate and population growth rate, very small dependency was found (National Research Council, 1986).

Population Aging and Economic Growth in China by Judith Banister, David E. Bloom, and Larry Rosenberg This paper discusses the possible effect of China’s aging problem on economic growth and social structure. With reducing fertility rate and increasing life expectancy, the population of the world is aging on an average. More than 2 billion people will be aged (age 60 or more) by 2050. For China, this is a serious issue since by 2050, 30% of its population will be aged. Its dependency ratio (number of working age group population/ number of young and old population) is at its peak but will decline sharply in coming years. Decrease in labor force will make it hard for China to sustain the level of GDP growth that it maintains right now. Also, because of China’s one child policy, that single child finds it tough to take care of two parents and two grandparents. There is suddenly an increase in number of abandoned parents and grandparents. Government of China and other such countries will soon have to make changes in the employment policies and social arrangements so as to accommodate the changing age structure. Several piece of information from this paper are later used in this paper.

The Demographic Transition: Causes and Consequences by Oded Galor This paper discusses the cause and consequence of demographic transition. First, the decline in population growth reduced the dilution of the growing stocks of capital and infrastructure, increasing the amount of resources per capita. Second, the reduction in fertility rates permitted the reallocation of resources from the quantity of children toward their quality, enhancing human capital formation and labor productivity. Third, the decline in fertility rates affected the age distribution of the population, temporarily increasing the fraction of the labor force in the population and thus mechanically increasing productivity per capita. Declining fertility rates and mortality rate have caused an increase in population but at the same time have increased the labor force which was directed towards development programs.

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Sources of Data and Quality
• Most of the data has been downloaded from World Bank Website (http://databank.worldbank.org) which is one of the most reliable sources of data on World Development Indicators (WDI) and Economic Indicators.

Some other websites that were used are • http://www.indexmundi.com • data.un.org • www.chinatoday.com/data/china.population.htm • censusindia.gov.in • www.demographie.net/demographicdata Some more information has been used from Wikipedia pages which is again very reliable. Some other information was available on Government websites of concerned countries. http://www.india.gov.in/ (Indian Government Website) http://english.gov.cn/ (Chinese Government Website) http://www.stats.gov.cn/english/index.htm (Statistic about China) http://www.india.gov.in/citizen.php (Statistics about India) Most of the data is derived from census and surveys conducted by National governments and UN agencies. All these results are exposed to the error of census and surveys. Although in developed countries these errors are smaller than countries like China and India where a large part of population is not reported and data are often adjusted and changed for political purposes. In China, data for Tibetan people is not accounted and in India people from Eastern India are often underreported. Other reason as to why census data are not 100% correct is: There are many reasons why people might not get counted in the Census, including: privacy concerns, homelessness, low literacy levels and not enough time to fill out the forms.

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Analysis
A brief introduction to China It is the world 's most populous country, with a population of over 1.3 billion. Covering approximately 9.6 million square kilometers, the country is the world 's second-largest country by land area, and the third- or fourth-largest by total area, depending on the definition of total area. Since the introduction of economic reforms in 1978, China has become the world 's fastest-growing major economy. As of 2012, it is the world 's second-largest economy, after the United States, by both nominal GDP and purchasing power parity (PPP), and is also the world 's largest exporter and second-largest importer of goods. Population and Projections
1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 China India

Population Trends in India and China China and India have followed similar trends in almost all demographic indicators, they only differ in magnitude. China has been the most populous country in the world from old days. But according to UN estimates India will overtake China as the most populous country by year 2030. China’s population is subjected to grow till year 2020 and then due to reduced fertility rate and increased mortality rate the net population growth rate will become negative and the population will begin to decrease. In India, although fertility rate has come down but still the net population growth rate is positive and will be so for many decades. The reason of such population explosion are very well explained by Population Demographic Theory, which takes in account changing patterns of fertility, mortality and life expectancy.

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Demographic Transition Theory Demographers (e.g., Frank Notestein, Kingsley Davis, Ansley Coale) characterized these three groups of countries, with their distinctive birth rates and death rates, with three different stages of demographic change, known as “demographic transition” which every society has to pass through: 1. The stage of high fertility and high mortality 2. The stage of declining mortality and high or medium fertility 3. The stage of low fertility and low mortality The graphs for demographic transition for India and China are given in forthcoming analysis.

Fertility Trends Both China and India have witnessed reduction in fertility rate, especially China for which fertility rates came down from 6.11 to 1.56 in 2010 and are projected to increase a bit to 1.81 by the year 2050. Although India is witnessing slow changes in fertility rate, we are still over the replacement level (2.1).
7 6 5 4 China (TFR) 3 2 1 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 India

Total Fertility Trends in India and China In the late 1970s and early 1980s, the government advocated a "later, longer, fewer" lifestyle, encouraging people to marry later, have wide gaps between children and fewer children overall. It also instated the controversial one-child policy. This policy was introduced in 1978 and initially applied to first-born children from 1979. It was created by the Chinese government to alleviate social, economic, and environmental problems
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in China, and authorities claim that the policy has prevented more than 250 million births between 1980 and 2000, and 400 million births from about 1979 to 2011. These were attempts to curb population growth in a bid to help modernize the economy. The results of this policy are well reflected in the drop of TFR in China from ~6 in 1970 to ~ 3 in years 1980. In India also several family planning missions were introduced but none of them were implemented effectively and that’s why fertility in India is still quite high. Reasons for declining Fertility 1. Education levels have increased significantly after the 1980’s in both the countries. Increased education labor has enabled women and families to make better decision for having children. 2. Family Planning Missions, Both India and China initiated family planning mission in the peak years of their population growth. In India, National Family Welfare Program was launched in 1951; Urban Family Welfare Schemes were introduced in year 1983 and Reproductive and Child Health Program in 1997 [india.gov.in]. All these schemes have definitely brought awareness among Indian Society to reduce the number of child bearing. In China, on the other hand the major policy decision in the name of Family planning schemes, was One Child Policy which officially restricts married, urban couples to having only one child, while allowing exemptions for several cases, including twins, rural couples, ethnic minorities, and parents without any siblings themselves.[ BBC: China steps up "one-child policy"]. Although this policy has much faced criticism but has brought down fertility to satisfactory levels. [Consequences of the one-child policy Perils of motherhood] 3. With increased awareness in masses about use of contraceptives have lowered birth rate. In India, many new projects were started regarding the same but people in India still hesitate to talk about contraceptives. The government of China also made sure that contraceptives are available to masses in all rural and urban localities. 4. Availability of economic opportunities in China has also provided an incentive to Chinese women to delay pregnancy.

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Life Expectancy and Mortality Life expectancy is one major important demographic indicator which shows the level of growth and availability of medical infrastructure. China had rapid increases in life expectancy from 1965 to 1980 and then it increased smoothly. For India also life expectancy but has always remained lower than China but the gape is projected to reduce towards the year 2050. Increased life expectancy leads to increase in number of old people in the country and thus they become a liability to the nation instead of being an asset.
90 80 70 60 50 40 30 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 China(Life expectancy) India

Life Expectancy Trends, China and India Mortality has declined all over the after the Second World War, like other factors China improved its death rate far more faster than India. The improvement that India achieved in 60 years, China achieved the same in only 25 years. In future China death rate is projected to go high because of death of old age population. High death rate will also become a reason of negative population growth rate in China in future.
30 25 20 15 10 5 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 China(Crude Death Rate) India

Death Rate Trends, China and Indi
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Reasons for decreased Mortality and Increased Life Expectancy 1. Availability of better health care facilities has improved life expectancies in both countries. According to an article by Tania Brenigan in The Guardian around 97% women in China gave birth in hospitals. In India these statistics are still are still very low, 47%. 2. Proper Health security plans in China have helped China to increase life expectancy. With higher income more people in China have access to hospital services. In India, health facilities are still away from a large segment of old people. 3. Another major achievement was that both countries were able to bring up the average age at first marriage. When average age at marriage goes up, the age at first child goes up automatically. This enabled women to have a kid only when she was physically ready for it. This helped to reduce infant mortality rate as well as maternal mortality rate. 4. Old people who are not very rich are also treated at good local hospitals. Aging and Dependency China has a very low death rate and high expectancy rate and this is causing the number of old people in the increase to threatening level. Total population of age 65 and above will cross 65 million by the year 2050 which will account for 26 % of total national population. China’s aging population will lead to several economic and social problems in the future which will be discussed later in this paper.

Age Structure China, 2010 Source: BBC.com

Age Structure China, 2050 Source: BBC.com

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China is witnessing its least dependency ratio during current years. It will rise back to the levels of 65 as it was in 1975. High dependency ratio can be very threatening in a country like China, because the backbone of China’s economy is its vast labor force, with a decrease in labor force China is doomed to speculate a fall in its economic growth. The ageing process in China has two distinguishing features. First, it has happened at a much faster rate than in other countries. According to UN figures, the ratio of those aged 60 and over across the world rose by 3 percentage points in the 60 years from 1950 to 2010, while in China it increased by 3.8 percentage points in just the 10 years from 2000 to 2010. Secondly, China is one of a few countries in the world in which the population has aged before becoming rich or even moderately rich. The UN considers a country to be ageing when 7% of its population is aged 65 or over - the threshold used to be 10% of a population being 60 years old or over.
90 80 70 60 50 40 30 20 10 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 China(Total dependancy Ratio) India

Changing Dependencies ratio in China and India

Effects and Consequences of Aging 1. Young population of China made a major contribution to rapid economic growth of China in a way that it provided abundant and cheap labor for Chinese industries. With aging population, industries will find it hard to find cheap labor for them and hence their profits are going to go down. It’s almost impossible for China to maintain its current growth rate in future.

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2. In case of India, it is still a very young country with vast educated youth. India’s has its least dependency ration for years to come. In India future economic growth rate will be decided by the policy decisions that government take. 3. With aging spreading fast in China, the institution of family is also breaking down [Ageing China: Changes and challenges, BBC]. Youth of that country is finding it hard to provide for two parents and two grandparents. 4. The number of abandoned old people has increased significantly in China and along with that the number of old age houses has increased. But they are still not enough to contain all the elderly population. Demographic Transition Theory in China and India Both countries were passing through the high fertility and high mortality trends, then both mortality and fertility started to decline and China and India reached the second stage of demographic transition. Currently both countries are in stage three where fertility as well as mortality is very low but the life expectancy is quite high.
45 40 35 30 25 20 15 10 5 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 China(CBR) China(Crude Death Rate) China Population

Demography Trends in China- 1950-2050
50 40 30 1000000 20 10 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 500000 0 2000000 1500000 India(CBR) India India ()

Demography Trends in India 1950-2050 12

Conclusion and Discussion
Many scholars around the world have been carrying out studies of comparison between India and China for past 20 years or so. Some of the most famous studies are “The demography of China and India-2030” by Michael J. White and “A brief comparison between India and china as emerging economy in Asia”, by Dr.Feisal Mirkazehi Rigi. Both India and other nations of developing world have much to learn from China and its policies. The main idea that comes out this paper is that both countries made efforts to bring down population growth, fertility, mortality etc. but what made difference is the fact that how efficiently these planning were implemented and executed. Health care plans failed in India for a variety of reasons such as poor infrastructure, failing to provide private sector important role in health care and more recently the issue of corruption [Health care in India - vision 2020, R Srinivisan]. Other factors that contribute to Chinese success are education and government policies. India was too late to bring economic reforms and that too for a short period of time. Most of the major reforms, related to health, education or other important issue took so many months and years in some cases, that their importance diminished by the time they were passed. Indian government’s failure in providing proper infrastructure for health care facilities made it impossible for health reforms to reach local masses. Number of physician per 1000 person is just .6 in India while it is 1.51 for China [World Health Statistics, 2011]. Only the rich in India have access to high tech medical care while poor still find it hard to take gains from basic health care. Educations also help a lot to tackle the issues of fertility and population growth. Education is one of the most important investments that a government has to make in developing the human resources. Educated people are more likely to contribute to income generation; they take better decision for their family and social life. Literacy rate in India is 74 % as compared to 99% in China. Especially for women, literacy rate is 79% in China while it is mere 64% in India [World Bank, Development Indicators]. Similar kind of analysis and results are exhibited by many other studies such as “Health care in India - Vision 2020, Issues and prospects” by R. Srinivisan, “China and India” by National Defense Research Institute and “Assessing the impact of fertility change and demographic masculinization on population structures in China and India” by Christophe Z Guilmoto.

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The reason I carried out this study as to show how these two giant countries are moving in the same path but with great differences in the rate of change. What I expect from readers is to take the message that the solution lies within our hand. It’s onto our policy makers that how they tackle this problem and how they can implement those policies efficiently.

Recommendation
What can be done in India? 1. A lot of policies and programs have been declared and initiated in India for family planning, education, girl education, gender equality and female employment, but most of them could not deliver the desired result. Our policy makers need to design a mechanism for tracking the performance of any scheme. 2. There is a need to redirect the budget allocation for many such schemes to areas on a basis of a survey conducted without political influence. 3. Most of the money of such programs is consumed by corrupt bureaucracy and middle man [Uttar Pradesh NRHM scam, http://en.wikipedia.org/wiki/Uttar_Pradesh_NRHM_scam]. In Uttar Pradesh, more than One Trillion INR was lost in corruption. The amount of medical care facilities that could have been achieved by that money is unimaginable. Government need to ensure that such cases are dealt with and they never occur again in India. 4. Providing an efficient infrastructure for medical infrastructure should be government prime objective. Achieving low mortality rates and high life expectancy such as of China will not be possible with such shortage of doctors, hospitals, beds and medical colleges. 5. Even if there is no corruption, no shortcoming on behalf of government in the implementation of these programs, they still might prove to be ineffective if people don’t know about them. Most of the Indian Population, especially rural population doesn’t know about many Health programs that are run for them. Proper information about all facilities should reach villages through the medium of television and radios. 6. Education, one of the building blocks of human resource should be given importance. The law of Right to Education should be implemented and the loopholes of the law should be removed. Small shows and seminars should be organized in villages to persuade parents to send their daughters to school so that in their future they can become independent and have equal say in decision making. 7. Increasing employment opportunities through small government programs will make women busy with their jobs and they will delay marriage and pregnancy. 8. Government should continue their mission to bring awareness about use contraception among the masses.

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What can be done in China? 1. For China, situation is completely different. Their almost all the policies are implemented efficiently. Education level is close to 100% and female participation in labor force is quite high. 2. The problem that China needs to solve is their aging population, sex ratio at birth and marriage squeeze [Damian Grammaticas]. 3. China’s fast economic growth is because of its export and for that the cheap labor was a chief reason. But now this labor is reducing. China’s needs to do economic restructuring to overcome the problem of lack of labor. 4. Like India, China will also have to invest in IT sectors where cheap labor is not such an important factor. 5. China is also going through a social change where young people are abandoning their parents and grandparents because of their financial inability to provide for the needs of four extra people. China needs to increase the number of old age shelters and have to make adequate health care arrangements for these poor old people. 6. After the massacre of 1989, the only reason of stability of Chinese Communist Party is the fast economic growth. If this goes down then the legitimacy of this government will also be questioned. Chinese government needs to be ready for such a situation. 7. The last but not the least, China needs to think about whether it should continue with One child policy or not. Because of One child policy, most couples abort their child if it is a girl, so the birth ratio at birth is highly in favor of boys. This is something a nation can take a century to overcome. The problem of marriage squeeze needs to be dealt with. 8. For many years, China has kept its doors closed for immigrants, may be its time for Chinese government to allow entry of young professionals, researcher and academicians in China.

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References
1. Historical GDP of the People 's Republic of China http://en.wikipedia.org/wiki/Historical_GDP_of_the_People 's_Republic_of_China 2. The Demographic Transition: Causes and Consequences by Oded Galor http://www.nber.org/papers/w17057.pdf?new_window=1 3. Population Aging and Economic Growth in China by Judith Banister, David E. Bloom, and Larry Rosenberg 4. The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change by David E. Bloom, David Canning and Jaypee Sevilla.
5. http://www.rand.org/content/dam/rand/pubs/research_briefs/2011/RAND_RB9598.pdf 6. http://www.demographie.net/guilmoto/pdf/IPAR2.pdf 7. http://www.bbc.co.uk/news/world-asia-19630110

8. China’s economic growth and labor employment – structural change, institutional evolution and policy issues by Dic Lo, Renmin University of China and SOAS, University of London 9. A study on Socio- economic determinants behind infant mortality and maternal mortality http://planningcommission.nic.in/reports/sereport/ser/stdy_immm.pdf 10. A brief comparison between India and china as emerging economy in Asia by Dr.Feisal Mirkazehi Rigi,PH.D in Economics from university of Pune 11. Assessing the impact of fertility change and demographic masculinization on population structures in China and India. Century-long forecasts with and without high sex ratios at birth by Christophe Z Guilmoto 12. Uttar Pradesh NRHM scam, http://en.wikipedia.org/wiki/Uttar_Pradesh_NRHM_scam 13. Health care in India - vision 2020, R Srinivisan

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References: 1. Historical GDP of the People 's Republic of China http://en.wikipedia.org/wiki/Historical_GDP_of_the_People 's_Republic_of_China 2. The Demographic Transition: Causes and Consequences by Oded Galor http://www.nber.org/papers/w17057.pdf?new_window=1 3. Population Aging and Economic Growth in China by Judith Banister, David E. Bloom, and Larry Rosenberg 4. The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change by David E. Bloom, David Canning and Jaypee Sevilla. 5. http://www.rand.org/content/dam/rand/pubs/research_briefs/2011/RAND_RB9598.pdf 6. http://www.demographie.net/guilmoto/pdf/IPAR2.pdf 7. http://www.bbc.co.uk/news/world-asia-19630110 8. China’s economic growth and labor employment – structural change, institutional evolution and policy issues by Dic Lo, Renmin University of China and SOAS, University of London 9. A study on Socio- economic determinants behind infant mortality and maternal mortality http://planningcommission.nic.in/reports/sereport/ser/stdy_immm.pdf 10. A brief comparison between India and china as emerging economy in Asia by Dr.Feisal Mirkazehi Rigi,PH.D in Economics from university of Pune 11. Assessing the impact of fertility change and demographic masculinization on population structures in China and India. Century-long forecasts with and without high sex ratios at birth by Christophe Z Guilmoto 12. Uttar Pradesh NRHM scam, http://en.wikipedia.org/wiki/Uttar_Pradesh_NRHM_scam 13. Health care in India - vision 2020, R Srinivisan 16