MNI INTERVIEW: China Population May Peak In 2025 -Top Advisor

China's population could begin to fall by as early as 2025, adding urgency to plans to smoothen national income distribution to ease the demographic drag on consumption and growth though targets to double GDP and income by capita by 2035 should still be met, a high-ranking policy advisor told MNI.

While the demographic contraction of the world's most populous country will begin at some point between 2025 and 2030, China should aim at annual 4.8% GDP growth on average over the next 15 years, said Cai Fang, director of the Institute of Population and Labor Economics at Chinese Academy of Social Science and a delegate of the National People's Congress, the top legislative body.

But rising savings, and a declining workforce as the population ages could hit consumption at a time when China's other economic drivers, investment and exports are relatively weak, with the country's labour cost advantage eroding as incomes rise, Cai, a demographer and economist, said in an interview.,

Tax and national insurance schemes should be adjusted in order to apportion a larger share of national income to groups such as the 100 million rural dwellers who have only recently exited poverty, the 290 million migrant workers without the same access to public services as people with urban residence rights, and the 245 million Chinese above the age of 60, he said.

PENSIONS

Extending coverage of insurance-based pensions to the whole population is key, as it will encourage workers to continue spending without fear of suffering penury in old age, said Cai. China aims to extend basic old-age insurance coverage to 95% of the population over the next five years, according to the 14th five-year plan released last Friday.

China's consumption/GDP rate is much lower than in most economies, while its saving rate is excessively high, at levels superior to investment. As capital is relatively plentiful, investment should increase if consumption picks up, he said, pointing to the new emphasis by officials on demand-side management together with supply-side reform, as China's overall "dual circulation strategy" seeks to boost domestic demand without ignoring export markets.

China's demographic transition has already seen the country negotiate one significant tipping point, when the size of the labour force peaked in 2010, followed, two years later, by a peak in economic growth, Cai noted.