China is becoming an ageing society. But, unlike other ageing societies such as Japan and Germany, it is getting old when its income is still relatively low. In terms of the share of old people in the population, China today looks like Japan at the end of 1980s, but in terms of per-capita gross domestic product, it has just reached the level of Japan in the early 1970s. Japan started more than 20 years of stagnation in the early 1990s, and many people fear that China will follow its footsteps in the next 10 to 20 years.
China’s demographic structure was almost the same as India’s until late 1970s when China started to enforce a stringent family planning policy. Since then its demographic transition has been very abrupt. The proportion of people over 60 years old is now more than 12 per cent of the population and those of working-age, between 16 and 65 years old, has begun to decline by 2.5m a year. Furthermore, labour movement from the countryside to the city, which used to be a major source of growth in China, is drying up. According to the official numbers, agriculture still employs 30 per cent of China’s total labour force. But most economists, such as Cai Fang, one of the most prominent economists on labour issues, believe that the real number is much smaller. The average farm is tiny — only about one hectare — so most farmers have to take additional jobs outside the farming sector to sustain a decent living.
The official data on urbanisation are also problematic. These figures only count people living in government-designated cities as urban dwellers. So, while many villages in coastal provinces have become industrial towns, their inhabitants are still counted as rural dwellers. In recent years, employment growth in coastal provinces has been stagnant. The number of migrant workers has even declined in 2015. Although rural-to-urban labour movement will continue in inland provinces, thanks to the government’s policy aim to move 100m people into the city, it is unlikely to be a major driver for China’s overall growth.