World News| China’s population imbalance may lead to labor shortages and rising employment costs

Beijing [China]April 26 (ANI): China’s demographic imbalance could have far-reaching economic impacts, including labor shortages, rising employment costs and weakening spending power, which will weigh on growth, a UN report says.

From 2011 to 2022, China’s working-age population aged 16 to 59 will decline by an average of 0.14% annually, and it is expected that the average annual decline will further slow down to 0.83% from 2022 to 2035. The proportion of the population will increase to 62% by the end of 2022 from 62.5% a year ago. According to United Nations data, by 2100, China’s labor force is expected to be less than 400 million.

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Fan Limin, chief Asia economist at HSBC, said China’s economy is entering a critical transition phase and can no longer rely on abundant and cost-competitive labor to drive industrialization and growth.

Robert Blom, a Toronto-based economist and managing director of investment firm Keen Resources Asia, sees China’s population decline as the single biggest drag on its growth.

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China is getting old before it gets rich, with major economic consequences as soaring health and welfare costs lead to falling incomes and rising government debt. Due to an aging and shrinking population, slower economic growth, a shrinking workforce and expected tax cuts will place a heavy fiscal burden on the government budget, making it difficult for China to achieve its Sustainable Development Goals (SDWs).

The era of double-digit growth in China is almost certainly over, and China’s growth rate in the coming years will largely depend on how it adapts to the economy’s structural challenges. China’s previous growth model based on cheap and abundant labor is no longer working, and the future is uncertain. The loss of human capital will mean fewer entrepreneurs, innovators and skilled workers to drive the economy and stimulate economic growth. The labor shortage and consequent increase in labor costs will make it harder for Chinese companies to compete in the global market.

China already faces a shortage of highly skilled workers, especially in technology, healthcare and engineering. That would pose a major challenge to Xi Jinping’s ambitious plans to make China the world’s largest economy and a dominant superpower.

There are other potential social implications for China, as its social safety net will come under pressure as the population ages to boost pensions and reduce the number of workers with healthcare needs. A shrinking workforce and rapidly aging population will affect contributions to the country’s vast pension system. An aging population and declining workforce could lead to higher social security costs.

China’s working-age-to-dependence ratio has risen from 37% in 2010 to 45% in 2021, meaning 45 out of every 100 people will need support. Demand for healthcare, aged care services and related products seeking significant investment will increase. China faces the dilemma of allocating scarce resources among the competing demands of various sectors while maintaining economic growth.

Despite the government’s efforts to increase healthcare coverage post-Covid19, the country’s healthcare system remains inefficient, uneven and inadequate. This will require significant investment in the future as China struggles to keep up with the pace of demographic and economic change. Cai Yong, a professor of sociology at the University of North Carolina who studies population issues in China, said that because Chinese people are living longer and the number of working-age, wealth-creating adults is shrinking, the cost of education, health care and pensions may be reduced by mid-century. will climb from 15% to 25% of GDP.

India, on the other hand, is well positioned to capitalize on this situation and influence trade and investment flows with the demographic dividend resource of a large working-age population that exceeds any other major economy in absolute numbers (1.1 billion) and proportionately (75%) and upend the global balance of power.

Due to the disruption of COVID-19 and rising geopolitical tensions with the West, industries and investors are looking for other destinations outside of China for their supply chains and factories. Rising labor costs due to a rapidly shrinking workforce and Western countries moving away from China for geopolitical reasons will shift low-margin, labor-intensive manufacturing from China to labor-abundant countries such as India.

India is also an attractive destination due to its huge market for goods and services. India has the potential to replace China as the world’s factory, as the current well-educated young Indian generation has become the largest global talent pool and the most attractive source of consumers and labor. In a sign of progress in this direction, Foxconn recently signed a deal with Vedanta to invest $20 billion in Gujarat to build the country’s first private semiconductor and display manufacturing plant. (Arnie)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)