China’s economy has entered ‘new new normal’, leading policy adviser warns in call for systemic reform
- More than 14 per cent of China’s population is aged 65 and above, posing a severe challenge to an economy struggling to regain post-Covid confidence
- Labour force will struggle to match structural changes in industry, noted economist Cai Fang says, urging further loosening of ‘hukou’ system
China’s economy has entered a “new new normal” triggered by a declining population and weak confidence in its post-Covid recovery, a noted policy adviser has warned, calling for systemic reforms to bring growth back on track for the world’s No 2 economic power.
“We have been talking about China entering a new normal with a shrinking population since over a decade ago … and have for the first time recorded a decline in population growth last year,” Cai Fang, a prominent labour economist at the Chinese Academy of Social Sciences and People’s Bank of China policy adviser, said on Sunday.
“As our demography is in a ‘new normal’, it will create new conditions for our economic development. I call this a ‘new new normal’ period for China’s economy,” he told the China International Finance Annual Forum in Beijing.
His comments come at a time when more than 14 per cent of the Chinese population is aged 65 and above, posing a severe challenge to an already weakening economy struggling to shake off a lack of confidence following prolonged pandemic curbs.
China’s potential in [economic growth] will fall further, even beyond original expectations
Last year, China reported its first population decline since 1961.
A shrinking and ageing population poses a challenge to the quality, spending power and motivation of China’s future workforce, diminishing overall productivity and capital returns, and ultimately hurting the long-term national growth potential.