THE FIVE RACES THAT LIE AHEAD FOR CHINA
The country faces crucial challenges in demographics, energy, the environment, balance of trade and ineqality.
Donald P. Kanak
Forbes, September 30, 2010
Arrive in Shanghai's airport today and you cover the 20 miles into the city in just over 7 minutes, on the Maglev train, capable of the fastest speed of any commercial train in the world. China today is moving on several tracks at unparalleled speed, from economic growth to urbanization to naval expansion. Last month the country passed Japan to become the world's second largest economy, and surpassed the United States in the size of its naval fleet.
Lost in these impressive statistics, however, are the perils China faces if it fails to maintain--or accelerate--the pace of change. Over the next three decades, China must run--and win--five simultaneous races in order to grow richer, smarter, cleaner and fairer before economic, demographic and environmental realities catch up. As hard as this will be, it is compounded by the fact that winning some of the races makes winning others more difficult.
First race: China is racing to grow rich before it grows old. As a result of the one child policy, China has an inverted age structure with a population pyramid skewed toward generations already in their working years. In 2005, China's working population was nearly 1.4 times that of India and more than four times that of the U.S. Between 2005 and 2030, however, whereas the U.S.'s working population will expand (by 13 million), and India's will soar (up 284 million), China's will remain flat. In fact, China's working population will begin to decline in 2015, and its number of aged, defined as people above 60 years old, will grow at double-digit rates to 2050 and beyond.
As the aged ratio rises rapidly, it will place increased stress on the country's nascent health care and pension systems. China will age as much in one generation as Europe did in a century. If China is to be affluent before it enters the ranks of "aging societies" like Japan and Northern Europe, it must continue to grow its GDP rapidly. That will requires lifting wages and skills of the urban workforce, moving low value-added manufacturing from the urban east to the poorer west, stimulating higher value-added economic activity, and building a vibrant service sector. Recent labor strife leading to large wage increases for certain manufacturers may be sporadic incidents or harbingers of a trend that is necessary for China to win this first race.
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