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The Sunday Paper – To What Extent Can Urbanisation Mitigate The Negative Impact Of Population Ageing In China?

Alicia García-Herrero and Jianwei Xu have produced a complimentary piece to work featured last week (about how an ageing population won’t be a problem for housing demand until around 2045). In the paper highlighted today the researchers take a look at how urbanization in China may offset the effects of ageing in terms of overall productivity.

To remind, a field hand when they move to the city nearly always ends up being more productive, in several ways, than had they stayed mucking out the pigs back home.

The research finds that the labour force overall, between now and 2035 will shrink only modestly BUT most of this will come from the less productive rural areas. The urban work force will continue to rise.

This urbanisation dividend is expected to persist until 2035 and contribute around 0.4% per annum to top line economic growth. Then the hard yards start. If nothing in the equation changes the effect of the ageing population from 2035 will retard growth by around 1.4% per annum.

The researchers note that there are a lot of variables at play. The old could become more productive. Robotisation and A.I. could increase labour productivity. The economy could itself change shape with beneficial consequences for production.

The main point is there’s no need to panic at this stage about an ageing population affecting economic growth; and after 2035? Things don’t look so good, but few things date faster than predictions of the future so let’s vex about this as, when and if we eventually have to address it.

You can access the work in detail here Can urbanisation mitigate ageing in China?

Happy Sunday.

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