Opinion | Why ageing China won’t overtake the US economy as the world’s biggest – now or in the future
- Growth trajectories must take into account that China is ageing faster than the US. The experiences of Japan, Taiwan and South Korea bear out the correlation between growth and demographics, and economists optimistic about China’s growth prospects should take note
In 2010, China replaced Japan as the world's second-largest economy. Many economists believe it is just a matter of time before China dethrones the United States as the world’s biggest economy – some have argued that it could happen before 2030.
They have cited the history of other Asian economies as evidence to back the claim. The nominal per capita gross domestic product of China was just a sixth of America’s in 2018 – a level similar to Japan in 1960, Taiwan in 1978 and South Korea in 1986. In the following two decades, the three Asian economies achieved annual growth rates of between 7 per cent and 8 per cent. As such, economists including Justin Lin Yifu, the former World Bank chief economist, have argued that China would go through a similar trajectory and the nation would be able to achieve a 6 per cent annual growth rate from now until the 2030s.
I beg to differ, however. These optimistic forecasts of China’s economic future neglect the country’s ageing population and its drag on growth. The younger an economy’s population structure, the stronger its vitality for economic innovation. As the median age rises and the proportion of the population aged 65 and over increases, so the economic growth rate could plummet.
In 1950, the median age was 22 in Japan and 30 in the US. Japan was younger than the United States and had higher economic growth. However, the average total fertility rate from 1951-2017 was 1.77 births per woman in Japan and 2.33 births in the US, which led to a population ageing faster in Japan than in the US.
Japan’s median age and the proportion aged over 65 surpassed the US’ in 1967 and 1992 respectively. Japan’s GDP growth has been lower than America’s since 1992 (excepting 2010). The size of Japan's nominal GDP rose from 8 per cent of the US’ GDP in 1960 to 71 per cent in 1995, and then fell to 24 per cent in 2018.
