![]() ![]() The United States faces challenges to its demographic stability as well: the U.S. ![]() China’s economic growth is likely to drop to 2–3 percent growth each year by 2030 as the nation grapples with declining birth rates and an aging population. A diminishing pool of working-aged individuals implies a rise in wages for Chinese laborers, which would make it more costly to produce today’s level of output with tomorrow's workers. Today, China’s birth rate rests below the 2.1 replacement rate at 1.7 births per woman, and the population is projected to peak around 2031. For China, the lack of a clear solution for its soon-to-be-shrinking population will likely be met with slower growth rates: its population is “ growing old before it grows rich.” Unfortunately for China, each of these economic powers have yet to employ a successful solution: no precedent exists to reverse the demographic challenge. Japan and South Korea experienced rapid economic growth along this pattern and achieved a high-income status before their fertility dropped sharply. This patterned population decline is ideally coupled with an increase in innovation and total factor productivity (TFP), or output produced with a certain set of inputs, to offset the shrinking workforce with heightened per-worker productivity. Countries moving through the Demographic Transition Model of economic growth-how a country’s economic development is linked to its population-often see a sharp decline in birth rates as they become richer. The United States, despite its own political gridlock and low fertility, is comparatively less constrained than China to address future population shifts.Įconomic prosperity is the most effective contraceptive for population growth. Based on political, social, and technological circumstances, China’s limited ability to react to this demographic shift will likely lead to slower growth outcomes in the next twenty to thirty years and impact its ability to compete on the world stage with the United States. Just before it reaches high-income status, China is on the cusp of a large demographic shift-a shrinking population of working-age adults coupled with an increasing population of retirees-and its economic growth prospects will be negatively impacted. GDP per capita was more than three times larger than China’s at purchasing power parity exchange rates. GDP was about 30 percent larger than China’s at market exchange rates, while U.S. China has experienced decades of rapid growth due to its integration into the global economy, mobilization of its massive work force, and economic reforms. The United States and China are competing for economic dominance. 'New Perspectives on Asia' highlights the research of junior CSIS staff and interns on issues that are quietly shaping the world's most dynamic region. ![]()
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