Bank of Korea Report "GDP Growth Rate Decline Due to Aging Population"
[Asia Economy Reporter Seo So-jung] The Chinese economy is rapidly transitioning from the past 'demographic bonus' to an 'demographic onus' era. As China's population ages rapidly, the country's economic growth rate is expected to decline, adding further pressure to global inflation.
On the 10th, the Bank of Korea's China Economy Team stated in a report titled "The Impact of Demographic Changes on the Chinese Economy" that "China's aging rate has been shown to reduce the gross domestic product (GDP) growth rate, raising increasing concerns about China's medium- to long-term growth trajectory."
China has rapidly increased the proportion of its elderly population, surpassing the 'aging society' status in 2000 and entering an 'aged society' last year. The United Nations (UN) classifies societies based on the proportion of the population aged 65 and over as aging society (7% or more to less than 14%), aged society (14% or more to less than 20%), and super-aged society (20% or more). According to this classification, China is expected to enter a 'super-aged society' by 2035 (20.7%), when the proportion of the population aged 65 and over exceeds 20%.
The report explained, "The decrease in China's working-age population and the resulting reduction in the supply of low-wage labor to multinational corporations imply that China could shift from being a deflationary export country to an inflationary export country," adding, "In a situation where global economic inflation concerns are growing, China’s factors will act as additional inflationary pressure in the medium to long term."
The report analyzed that if the proportion of the elderly population in China’s total population rises by 1 percentage point (p), China’s GDP growth rate decreases by 0.1 to 0.5 percentage points.
Applying the future population changes estimated by the UN, China’s GDP growth rate is expected to decline by 0.1 to 0.5 percentage points in 2025 compared to 2021, 0.3 to 1.2 percentage points in 2030, and 0.6 to 3.0 percentage points in 2035 solely due to demographic changes. Additionally, if the elderly population proportion increases by 1 percentage point, government expenditure as a percentage of GDP is estimated to rise by 0.1 percentage points, while government tax revenue is expected to decrease by 1.8 percentage points.
In particular, changes in China’s demographic structure are also identified as a key factor driving future changes in China’s industrial structure and the global economy.
The report stated, "Demographic changes in China, characterized by population aging and a decline in the working-age population, are among the most important factors affecting the Chinese economy in the medium to long term," and predicted, "According to changes in China’s demographic structure, the transition from labor-intensive industries based on low-wage labor to high-tech and capital-investment knowledge industries such as AI, new energy, and autonomous vehicles will accelerate further, and the U.S. containment of China will also intensify."
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