An ageing China needs to grasp the immigration nettle now

Winston Mok says the new two-child policy is a welcome step in addressing demographic problems, but more needs to be done to attract foreigners and the Chinese diaspora bringing their skills and entrepreneurial vision

PUBLISHED : Sunday, 15 November, 2015, 11:15am
UPDATED : Tuesday, 24 November, 2015, 8:59am

Although China’s new two-child policy will stimulate consumer demand, its impact to replenish the ageing workforce will not be felt until two decades from now. China’s working population peaked already, and its decline will accelerate.

While China is expected to overtake the US as the largest economy in the next decade, it is unclear how long it will keep that position. In contrast to China’s ageing work force, the US will keep on adding young people, including some of the best and brightest from China. For China’s economy to keep pace with the US, it has to pour in a lot more investments, which is unsustainable, or innovate faster , which is difficult.

To arrest its ageing population, China would need the twin engines of pro-birth and immigration

For all the wrongs (and rights) of the US economic system, it has the unassailable advantage of population growth. From now to the middle of this century, the US population is expected to grow by a third, to 440 million. Most of that growth will be driven by immigration, which has contributed great dynamism to the US economy.

From more than four times the US population today, China’s population may fall to about three times the US level by the middle of the century. Such an adverse trend will be slightly moderated by China’s latest two-child policy. But to arrest its ageing population, China would need the twin engines of pro-birth and immigration.

Many may be drawn by China’s economic opportunities – if not disheartened by the difficulties of learning the language. And they will grapple with issues such as internet censorship. The late Lee Kuan Yew saw China’s difficulties in attracting international talents as a key challenge to its rise. In this context, ethnic Chinese may be a good place to start.

First, Beijing may start with its former citizens. Of the 3.5 million mainland students who went abroad since 1978, half have remained overseas. Some have acquired foreign citizenships and residencies. They are arguably the most natural targets: armed with foreign education and experience, yet more ready to be reintegrated to their country of birth. If they are granted long-term visas in China, with similar access to education and health care as locals, more may return.

Second, China could be an attractive destination among the 50 million overseas Chinese. A good proportion of foreign students in China come from Southeast Asia, where 60 per cent of overseas Chinese live. Ways should be developed to facilitate their assimilation.

Third, Hong Kong may be another source of “migrants”. Hong Kong is where it is today thanks to the influx of talent and capital from the mainland since the middle of the last century. Now with greater economic opportunities in the mainland, there is no reason why migration cannot happen the other way. Hongkongers may live in the mainland – but as foreigners in their own country without access to local social services. Shanghai has recently started offering resident benefits such as health care and education to workers and investors from Taiwan. Similar schemes may be devised for Hongkongers.

In parallel to attracting immigrants, stemming China’s emigration outflow is perhaps just as important. A high proportion of China’s rich and many middle class families plan to emigrate. Behind this trend are many factors, including education, lifestyle, pollution and the rule of law. To keep its most capable people from voting with their feet, Beijing must work harder to make China a more attractive place to work, to do business, to live and to raise families.

Millennia before the US, China has been a multinational state. More than conquests, it grew through immigration and assimilation. In the Tang dynasty, seen as the apex of Chinese civilisation, its capital Changan (today’s Xian) was filled with long-term foreign residents. Foreign talents wielded influence in Chinese society in ways unimaginable today. Beyond trade and investments, attracting global talents can be an important component in China’s new Silk Road initiatives.

Winston Mok is a private investor, a former private equity investor and McKinsey consultant. An MIT alumnus, he studied under three Nobel laureates in economics