Disturbing Demographics in China

There have recently been some interesting articles about Chinese demographic trends. The first was published by the Economist and is entitled "Bare branches, redundant males." This article chronicles how the Chinese one-child-per-couple policy (the "OCPCP"), enforced since 1980, has, when combined with a cultural preference for boys and sex-selective abortions, completely distorted the marriage market.

Babies are naturally born in the ratio of about 105 boys for each 100 girls. In China, with sex-selective abortions, this ratio has recently been in the range of 116 to 100. This translates into 66 million "missing" girls, or roughly 10 percent of the female population. Through a series of other demographic factors -- including falling fertility rates, the tendency of men to marry younger women, a "queuing effect" (resulting from the fact that men have a longer shelf-life in the marriage market than women), and the tendency of women to stay single as they become wealthier -- this disparity is expected to be amplified. A projection from a French population think tank indicates that, at its worst in the years 2050 through 2054, there could be 186 single men for each 100 single women looking to marry. This "marriage squeeze" will also not be proportionately spread across the population: since women tend to "marry up" from a socioeconomic perspective, and men tend to "marry down," this means that men at the bottom of the ladder and women at the top will find very slim pickings indeed.

All of this matters, among other reasons, because a lot of unattached males, particularly from the lower socioeconomic strata, does not exactly promote a healthy society. A Columbia University study, for example, found that a 1 percent rise in the Chinese sex ratio was associated with a 6-7 percent increase in violent crimes and theft. Belatedly, the Chinese government -- those hyper-intelligent Mandarins in whom investors place so much faith -- has recognized this problem. They have loosened some of the restrictions in the OCPCP. They are also doing helpful things like publishing articles in state-run newspapers promoting marriage to foreigners. One of their fatuous suggestions: Ukraine is apparently a very promising source of mail-order brides, which goes to prove that Chinese political leaders have obviously never read A Short History of Tractors in Ukrainian.

Other interesting demographic dynamics are the coming end of rural migration to the cities and China's rapidly aging population, both as highlighted in a recent article in the Financial Times. When a country is developing, its economy receives a big boost from shifting labour from low-productivity rural activities (such as farming) to higher productivity jobs in the cities. Since Deng Xiaoping launched his reforms in 1978, 278 million Chinese workers have moved from villages to the cities, greatly accelerating China's growth. This migration is coming to an end, in an event known to demographic's geeks as the "Lewis Turning Point." In addition to this, China has a rapidly aging population, the result of falling fertility and the OCPCP, which means that the working age share of the Chinese population will peak this year at 72 percent. From this point, the fall in the Chinese working population will be even sharper than is being experienced by Japan, where adult diapers now routinely outsell baby ones. Put the Lewis Turning Point and a greying population together, and the potential growth of the Chinese economy is due for a sharp decline.

And there is another factor. When it comes to development, the easy part is at the beginning, particularly for top-down economies and cultures. The path of development has been well trodden by previous societies. A country like China can advance very quickly simply by employing the strategies and technologies pioneered elsewhere -- there is a huge amount of "second mover" advantage in economic development. However, the ability to advance by copying others decreases over time and developing countries have to start working at the innovation coal face, like their more advanced brethren. One of the reasons Japan has struggled is that it never successfully made this transition from "input-based growth" (throwing more human and capital resources at doing the same things) to "innovation-based growth" (using the same inputs, but doing things smarter). For years, Japan's failure to successfully navigate this change was masked by a huge economic bubble. With China, it may be a case of déjà vu all over again.