China’s Ageing Population: Policy Implications for Economic Growth

China’s huge population and its large-scale rural surplus labour migrating to the cities were key drivers of economic growth in the 1980s and 1990s. However, China’s comparative advantage in labour-intensive production has been hampered by three features. First, rural surplus labour has fallen sharply, from 120 million in 1997 to 25 million in 2015 (Kwong 2020, p. 104). Second, China has encountered population ageing. The median age rose from 29.8 in 2000 to 38.4 in 2020, while the share of the older population rose from 10% to 17.4% (Statista (2021a). Third, a declining birth rate since 1987 and a relatively stable death rate brought the natural growth rate of the population to an unprecedented low of 3.34 (per 1000) (Birth rate, death rate and natural growth rate of population are calculated based on 1000 people of the population.) in 2019. To counter this trend, qualitative measures include increasing human capital investment, particularly in higher education. Resources should be diverted to higher returns sectors rather than state sectors to fulfil policy targets. For capital efficiency China also needs to boost investment in research and development to increase technology-driven growth. Finally, institutional barriers that limit the access of migrant workers’ children to local education and public services should be gradually removed. Thus, educated and trained young people will replenish the labour supply.