China's army of young, educated workers will keep economy on track

THERE are plenty of dire predictions around China: its economy might suffocate under a mountain of debt. If not, then pollution - witness Beijing's toxic skies - could bring growth to a screeching halt. If these arguments fail to impress, sceptics point to China's supposed demographic time bomb: the country's population is among the most rapidly ageing in the world. Having fewer workers, doomsayers argue, will put a dent in China's bright future, decimating its impressive growth rates, which, for all the economy's recent travails, are still the envy of the world.

Well, the demographic issue at least will turn out to be more of a damp squib. True, at the surface, China is beginning to grapple with one of the most severe demographic challenges in living memory. Due to the one-child policy, imposed in the early 1980s, the country is now ageing fast. By some estimates, its working age population has started to shrink this year as more citizens retire than join the labour market. Over the coming decade, some three million fewer workers will be available every single year. Parallels with Japan come to mind: the number of Japanese workers has steadily declined since the mid-1990s, leading to two decades (and counting) of stagnant growth.

It's not that Beijing officials haven't noticed. They recently switched to a two-child policy, after in recent years allowing parents without siblings to have two children. That might help, but it's not going to arrest the decline in the labour force. To stabilise population growth, on average 2.1 births are needed per woman. Even under optimistic assumptions, the current average of 1.7 might only rise to perhaps 1.9. One challenge is that few young Chinese are keen to have larger families, not least because of the soaring costs involved.