On opposite sides of the globe, two debates that will profoundly affect the future of the world are raging. One of them has become shrilly public while the other remains almost secret. On the surface they might seem to have little to do with each other but, in reality, they are inextricably linked.

The first debate, which is unfolding in America, concerns immigration. Republicans such as Donald Trump and Ted Cruz have staked out some of the more radical positions in this debate, such as urging that the US build a wall to keep out illegal immigrants and that it deport the millions who are already in the country. The other debate, which is playing out in Beijing, is about how big a navy China should build, and how much it should contest America's primacy in the world's oceans.

To a degree scarcely suspected by most people, both debates - and more generally, America's chances of maintaining its standing in the world - are bound up in the two countries' sharply contrasting population dynamics.

Demographic time bomb? China’s army of young, educated and willing workers will keep economy on track

Under President Xi Jinping, China has until very recently appeared to be a global juggernaut - hugely expanding its economic and political relations with Africa; building artificial islands in the South China Sea, a body of water it now proclaims as almost entirely its own; and launching the Asian Infrastructure Investment Bank, with ambitions to rival the World Bank. The new bank is expected to support the One Belt, One Road initiative, a collection of rail, road and port projects designed to lash China to the rest of Asia and even Europe. Projects such as these aim not only to boost China's already formidable commercial power but also to restore the global centrality that Chinese consider their birthright.

As if this were not enough to worry the US, China has also showed interest in moving into America's backyard. Easily the most dramatic symbol of this appetite is billionaire Wang Jing's plan to build a canal across Nicaragua that would dwarf the American-built Panama Canal. But this project has stalled, an apparent victim of recent stock-market crashes in China.

It doesn’t matter what happens now with the fertility rate. The old people of tomorrow are already here
Chinese demographer

 

 

Many economists believe these market plunges are early manifestations of a historic slowdown in the Chinese economy, one that is bringing the country's soaring growth rates down to earth after three decades of expansion. But the current slowdown pales in comparison with a looming societal crisis: in the years ahead, as China's baby boomers reach retirement age, the country will transition from having a relatively youthful population, and an abundant workforce, to a population with far fewer people in their productive prime.

China must scrap remaining birth control policies to avert demographic crisis, says medical researcher

The frightening scope of this decline is best expressed in numbers. China today boasts roughly five workers for every retiree. By 2040, this highly desirable ratio will have collapsed to about 1.6 to one. From the start of this century to its midway point, the median age in China will go from under 30 to about 46, making China one of the older societies in the world. At the same time, the number of Chinese older than 65 is expected to rise from roughly 100 million in 2005 to more than 329 million in 2050 - more than the combined populations of Germany, Japan, France and Britain.

The consequences for China's finances are profound. With more people now exiting the workforce than entering it, many Chinese economists say that demographics are already becoming a drag on growth. More immediately alarming are the fiscal costs of having far more elderly people and far fewer young people, starting with the expense of creating the country's first modern national pension system.

Unlike residents of China's prosperous eastern cities, hundreds of millions of peasants and migrant labourers have scant personal savings and rudimentary retirement coverage, if any.

The solution to China’s demographic time bomb lies in changing age-old attitudes

"One goal is to extend pension coverage to everyone," says an economist with the Chinese Academy of Social Sciences, in Beijing. "But that will be very expensive, because most people haven't paid anything into the system at all. Basically, what this means is a wealth transfer."

Providing health care to these same disadvantaged classes will also be vastly expensive.

Mark Haas, a political scientist at Duquesne University, in the US, has for some time warned of a looming contest between guns and canes - a variant on the old idea of guns versus butter - as the world's major countries grapple with demographic change.

"China's political leaders beginning in roughly 2020 will be faced with a difficult choice: allow growing levels of poverty within an exploding elderly population or provide the resources necessary to avoid this situation," Haas writes in the book Political Demography. If Beijing decides in favour of the latter option, Haas argues, American power will benefit. More broadly, he foresees a coming "geriatric peace", as nations around the world find themselves too burdened to challenge America's military pre-eminence.

Recent events may well provide a preview of this reality. When Xi announced last year that he was slashing China's armed forces by 300,000 troops, Beijing span the news as proof of its peaceful intentions. Demographics provide a more compelling explanation. With the number of working-age Chinese men already declining - China's working-age population shrank by 4.87 million people last year - labour is in short supply. As wages go up, maintaining the world's largest standing army is becoming prohibitively expensive. Nor is the situation likely to improve: after wages, rising pension costs are the second-biggest cause of increased military spending.

Awakening belatedly to its demographic emergency, China has relaxed its one-child policy, allowing parents to have two children. Demographers expect this reform to make little difference, however. In China, as around the world, various forces, including increasing wages and rising female workforce participation, have, over several decades, left women disinclined to have large families.

China's fertility rate began declining well before the coercive one-child restrictions were introduced in 1978. By hastening and amplifying the effects of this decline, the one-child policy is likely to go down as one of history's great blunders. Single-child households are now the norm in China, and few parents, particularly in urban areas, believe they can afford a second child. Moreover, many men won't become fathers at all: under the one-child policy, a preference for sons led to widespread abortion of female fetuses. As a result, by 2020, China is projected to have 30 million more bachelors than single women of a similar age.

"It really doesn't matter what happens now with the fertility rate," a demographer at the Chinese Academy of Social Sciences says. "The old people of tomorrow are already here." She predicts that in another decade or two, the social and fiscal pressures created by ageing in China will force what many Chinese find inconceivable for the world's most populous nation: a mounting need to attract immigrants.

"When China is old, though, all the countries we could import workers from will also be old," says the demographer. "Where are we to get them from? Africa would be the only place, and I can't imagine that."

Not so long ago, conventional wisdom held that China's economy would soon overtake America's in size, achieving a gross domestic product perhaps double or triple that of the US later this century. As demographic reality sets in, however, some Chinese experts now say the country's economic output may never match that of the US.

With American baby boomers entering retirement, the US has its own pressing social-safety-net costs. What is often neglected in debates about swelling entitlement spending, however, is how much better America's position is than those of other countries. Once again, numbers tell the story best: by the end of the century, China's population is projected to dip below one billion for the first time since 1980. At the same time, America's population is expected to hit 450 million. Which is to say, China's population will go from roughly four and a half times as large as America's to scarcely more than twice its size.

Even as China's workforce shrinks, America's is expected to increase by 31 per cent from 2010 to 2050. This growing labour supply will boost economic growth, strengthen the tax base and relieve pressure on the social security system. At the same time, Americans will continue to enjoy a substantial advantage over the Chinese in terms of per capita income. This advantage in wealth will continue to underwrite US security commitments and capabilities around the world.

That the US is not facing population shrinkage is due largely to immigration. America's fertility rate, while higher than that of China and many European countries, is still below the threshold required to avoid shrinkage; about 2.1 children per woman. By keeping its doors relatively open to newcomers, America is able to replenish itself. If the country were to shut its doors, its population would plateau and its median age would climb more steeply. According to the Pew Research Centre, immigrants and their children and grandchildren will account for 88 per cent of US population growth over the next 50 years.

These new arrivals are widely portrayed in a variety of ways that fail to convey their true importance to the American economy and future. Sometimes they are thought of as undesirables who get by doing unskilled labour. Other times they are depicted as taking good jobs and opportunities from citizens. In some cases, they are demonised as criminals. Less often, they are romanticised as the brainpower driving American technological ingenuity.

The truth is broader and far less exotic. America assimilates outsiders on a scale matched by no other powerful country: immigrants inhabit every rung of society and work in every sector. Immigration, perhaps more than any other single factor, sustains American prosperity. And immigration will, shrieking campaign rhetoric notwithstanding, spare the US the fate now threatening to engulf its competitors.

The Atlantic