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May, 27

Economic Growth: China’s ageing population to hit growth: Report

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NEW DELHI: China’s ageing population will erode its economic growth potential in the long term, should policy measures fail to boost the birth rate, raise productivity via technological progress and shift its industrial strategy to mitigate the supply and demand imbalance, global ratings agency Moody’s Investors Service said in a report on Thursday. “Barring gains in productivity, the decline in labour supply and increased healthcare and social spending could lead to a wider fiscal deficit and higher debt burden,” the report said.

China is already grappling with slowing growth, consumption as well as issues linked to its real estate sector. It said that a fall in the savings rate – as older population cohorts retire and draw down lifetime savings over the long term – will push up interest rates and lead to declining investment and capital stock as growth drivers.

“Under these circumstances, China’s fiscal strength will deteriorate and compound the drag from ageing on economic potential, a credit negative for the sovereign. While policy efforts are underway to mitigate these effects, the success of such initiatives remains uncertain,” said the report.
It said that China’s population has been ageing at a rapid pace since 2010, with a decline of the newborn rate by about 30% over the next decade. The working-age population (defined by the UN as those between 15 to 64 years of age) has shrunk from the peak of 73% of the total population in 2010. The report said that the size of the working-age group is forecast by the UN to decline by nearly 40% by 2050 from 2010 if fertility rates remain at current levels. Meanwhile, the population over 65 will more than triple to almost 400 million – about one-quarter of the total population – by 2050 from levels in 2010.
“While China’s challenges mirror the broader global demographic slowdown, its population ageing differs from that of developed nations because the growth in pensioners has come before China has fully developed the means to look after them,” said the report.
It said that Japan’s household GDP per capita was approaching developed-nation levels before the population began to plateau in the late 1980s. “In comparison, China’s GDP per capita was $2774 in 2010 and stood at $7,322 in 2022 versus $24,221 in Japan and $58,151 in the US,” the report added.





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