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East Asian

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China’s Quarter-Century

The picture of the two Asian giants that most people carry around in their heads shows China racing ahead economically while India bumbles along, falling ever further behind. People even talk about the 21st century as “China’s Century”, just as they called the 20th century the American Century. But it may turn out to be only China’s Quarter-Century.

The headline economic news this year is that India’s economy is growing faster than China’s. Not much faster yet, according to the official figures – a 7.5 percent annual rate for India vs. 7.4 percent for China – but there is good reason to suspect that the real Chinese growth rate is considerably lower than that.

Anybody who goes to both countries can see that India has a huge amount of catching up to do. The contrast in infrastructure is especially striking: China has 100,000 km of expressways (freeways, motorways); India has only 1,000 km. But the differences in income and productivity are also very big: Gross Domestic Product per capita in China is between three and five times higher than in India, depending on how you calculate it.

But that is a snapshot of now. It was very different thirty-five years ago, when per capita income in India was still higher than it was in China. It was then-leader Deng Xiaoping’s decision in 1978 to open up the Chinese economy that unleashed the spectacular economic growth rates of the recent past, and an economy growing at ten percent a year doubles in size every seven years.

That means (allowing for a little slippage) that the Chinese economy has grown more than twentyfold since 1978. That’s why it is so far ahead now. India’s growth rate was a quite respectable three or four percent for most of that period, but that gave the Indian economy a doubling time of around twenty years, so it has only grown around threefold during the whole period. India is not chronically poorer than China. It just missed that particular bus.

The next bus has now arrived: India actually could catch up with China if its economic growth rate is now really surging ahead of China’s. There is good reason to believe that it is, because China’s declared growth rate for this year is pure fiction.

China avoided the global recession after the 2008 crash by opening the credit taps to full and embarking on the largest spending spree on infrastructure (roads, housing, railways and airports) that the world has ever seen. But capitalist economies cannot avoid recessions forever. The country is now full of empty apartment buildings, the private debt load has doubled in five years – and the recession is coming.

More than that, China’s period of high-speed growth was probably always going to be limited. Japan enjoyed a quarter-century of ten percent annual growth in 1955-80 and became, for a while, the world’s second-biggest economy. But once its per capita income reached developed-world levels, the growth rate dropped down to developed-world levels too: between two and four percent. (Now it’s almost nothing.)

In fact, all the East Asian economies (except North Korea, of course) have followed the same pattern: a lengthy burst of ultra-high-speed growth, followed by a fall to the developed-state norm once a certain level of prosperity has been achieved. South Korea and Taiwan both did it – and then subsided to a growth rate not very different from that of the United States.

China has also had its quarter-century of ten percent growth, and it is probably over. The official figure for economic growth last year was still over seven percent, but the less easily manipulated numbers for rail freight, electricity production and bank lending suggest that the real growth rate was only around three percent. That is to say, less than half of India’s.

The other thing that will hold China back in future is a steady fall in the population of working age. India’s birth rate is still 2.7 children per woman (though it’s falling fast). China’s is at most 1.7, and the one-child policy means that it may even be lower than that. So fewer and fewer young Chinese are entering the work-force, whereas there will be no shortage of young Indians.

India’s total population will overtake China’s in less than five years (they are both around 1.3 billion), and after that the gap will steadily widen. While China’s population shrinks and its economic growth slows, India is only now entering the golden quarter-century of high-speed economic growth. In 25 years’ time, India may be back in the position it occupied for most of the past two thousand years: the biggest economy in Asia.
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To shorten to 725 words, omit paragraph 9 (“In fact…States”)

The Vanishing Babies

29 August 2005

The Vanishing Babies

By Gwynne Dyer

The Japanese have known it was coming for years, but it still arrived sooner than anyone expected. The Japanese population has gone into absolute decline, and there will be at least 60,000 fewer Japanese at the end of this year than there were last January. In coming years, the decline will only accelerate.

It’s the same elsewhere in East Asia. Last week, the National Statistical Office in Seoul announced that South Korea’s total fertility rate (the number of babies the average woman has in a lifetime) has now plummeted to 1.16, even lower than Japan’s. China’s looks better at 1.7, but that is deceptive because there is a 15 percent surplus of boys over girls in the youngest population groups. All these countries’ populations are going to start falling steeply over the next generation.

The obvious explanation is that the East Asian countries, as they educate their people and turn into fully developed societies, are simply following the well-beaten path first travelled by the European countries. Italy, after all, has a total fertility rate of only 1.4, and Russia’s is down to 1.3: if these trends persist, there will 15 million fewer Italians by mid-century, and 40 million fewer Russians. But the obvious explanation is probably wrong, because not all developed countries have collapsing birth-rates.

In countries that have attract large numbers of immigrants, like the United States, Canada and Australia, the population will continue to grow or at least remain stable, but they are not relevant to the East Asian case. China, Japan or Korea could easily attract immigrants in large numbers, but they could not integrate them: their citizens simply cannot believe that a new arrival from the Philippines, Iran or Ethiopia could ever become a full member of the host society. However, some European countries are holding their populations without mass immigration.

The average fertility rate in France, to pick the most striking example, is 1.9. That is not quite enough in itself to keep the population stable over the long term, as the “replacement” rate is 2.2, but it is close enough to the replacement level that a relatively small flow of immigrants guarantees continued growth in the population. The French population, now close to 60 million, is forecast by the United Nations to be 63.5 million in 2025. So what are the French doing right?

France and Japan are both fully industrialised, highly urbanised, very well-educated countries with generous social services. They are both places where it is very expensive to have children. And both countries have experienced extreme fluctuations in their birth-rates in response to changing conditions.

Japan’s population almost doubled in the half-century after 1945, from 70 to 125 million. If current trends persist, it will be back down to 70 million before the end of this century. France’s population, by contrast, was already 40 million in 1840, but it then stopped growing for a hundred years, mainly because it remained a largely rural country and generations of farmers limited their children in order to keep the land together. Then the rapid post-war urbanisation of France ended the obsession with land, and in the past half-century the population has grown from 40 to 60 million. It is still growing, albeit slowly. Why?

The biggest difference between France and Japan is the status of women. Japanese women have a low status in the family, and despite the occasional female high-flyer they have an even lower status in the workforce (which they are generally expected to leave after they marry). As a result, they have effectively gone on strike: the average age of Japanese women at marriage is going up by several months each year, and the birth-rate has collapsed.

In France, by contrast, the traditional male-dominated family is all but dead — almost half of all French children are born “out of wedlock” — but informal new styles of family living give women more control over their lives while still providing secure environments for most children. And the main thing women do with their freedom is to stay in the workforce: 80 percent of French women between 24 and 49 work, the highest rate in the EU.

It’s not just about money; it’s about independence and satisfaction with one’s life. The French government helps its female citizens with free child-care (even for the very young), with subsidised vacation camps during the school holidays, and with tax breaks and family allowances for bigger families, but other countries do the same with much less impact on the birth-rate. The three-child family is still a normal phenomenon among the French middle class because French women do not feel they must choose between motherhood and a real life outside the house.

There are no immediately useful lessons in this for East Asian societies, since changing popular attitudes on gender roles take decades or generations. For the many countries that are still in the “demographic transition” and working to get their birth-rates down to 3.0 or even 4.0, it is bound to seem a distant, hypothetical problem. But there is a lesson for everybody here.

The lesson is this: if you don’t want your country’s population to fluctuate like a yo-yo on a fifty-year string, pay attention to women’s status inside and outside the family.

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To shorten to725 words, omit paragraphs 4 and 11. (“In countries …immigration”; and “There are…here”)