My last post described the weaknesses implicit in China’s centralized approach to economic direction. This post takes up a bigger problem. A central planning mistake from years ago and continued for decades – the country’s one-child policy – has set up China to lose its economic dynamism and limit its growth potential for years to come.
The key demographic in this regard is the relative size of the country’s working population. Because China’s one-child policy has over time come to limit the human resources available to support the country’s dependent population, largely China’s elderly, the nation will lose much of its ability to invest for future growth. The figures are stark. According to United Nations (UN) demographers, China’s workforce has already begun to shrink absolutely even as the country’s dependent elderly population has continued to grow rapidly. Of course, labor power is not the whole story. Technological advances and productivity increases will allow a more efficient use of China’s available human resources, but the demographic situation will nonetheless limit Beijing’s options, especially when it comes to the huge development projects that have awed so many around the world, including the so-called “Belt and Road,” as well as China’s military buildup.
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