China's aging and demographics: once again, everyone is wrong

This is a transcript, for the video found here:

Bullets:

China's population is aging rapidly, roughly in line with demographic trends in the rest of the world.

But China's population decline begins at the highest baseline in human history. And elderly Chinese place a far lighter fiscal burden on their government pension systems, compared to those in Western countries.

China's population across younger age bands is still substantially higher than in the United States, the EU, Australia, and Canada--combined.

When younger populations across the BRICS countries are considered, demographics in China and across the Global Majority countries are far more favorable today, and in the future, than for the G7.

Report:

Good morning. This is a population pyramid for China, for 2024. Population pyramids are powerful visual tools, used by demographers and policy analysts. On the y-axis, we have age ranges, usually 5 years. On the very bottom the age group from 0-4, then age 5 through 9, up to 100-plus years old. The x-axis is expressed either in percentages, or in raw numbers, like millions. And then we put the boys on the left, and girls on the right. It is also easy to see what the pyramid is likely to look like in 5 years, or ten—these bulges will just move up. So the 8.3% of China’s population that are between 35 and 39 years old now, they will be 40-44 years old in 2029, for example.

There is an entire cottage industry of pundits and YouTubers who play around with these statistics like these, and report that China’s economy is on the verge of collapse because of their aging problem. It may be the easiest money in the world, to do a China collapse video and upload it, and then you get paid while you sleep for the rest of your life. It’s lazy, low-effort work, because if you take a quick look under the hood, the thesis falls apart. It’s true that China is aging fast, now, along with most of the rest of the world. The entire developed world has severe problems, with demographics and aging.

But China is starting this process from the highest baseline in human history—one billion four hundred million.

The second issue is the assumption that China’s government will bankrupt itself, the way our governments are, by providing old age pensions and medical care for their elderly. In reality, Chinese retirees cost China’s government a lot less to support, compared to retirees in the United States or Europe, especially. The cost of living in China is less than a fifth what a comparable lifestyle costs in the United States for example, and don’t get me started again on how much medicine and medical care costs in Europe and the United States, compared to here. The newest drugs and treatments literally cost a hundred times more in the United States compared to China.

To the first point, here are the population pyramids of China and the United States. They look about the same, when we compare percentages of populations. But let’s change the x-axis to population, in millions, and it’s a completely different story. These data are from 2020. Looking just at the bottom row, in 2020 the United States had about 11 million boys, aged newborn through 4 years old. In China, there were 45 million boys, over 4 times as many. American girls, just under 10 million, in China, just under 40 million. So right now, China’s got 85 million kids under the age of 5, while the US has 21 million. Fifteen years from now, China will have more than 4 times as many kids graduating high school and heading off to college. 25 years from now, 4 times as many young people being married and having families of their own—just from that sliver of their population pyramid.

Let’s look now at populations, under 40 years of age. This is the most dynamic age groups, economically—they’re young people growing up and starting careers and businesses and families, and moving up into middle management roles. In China, the total population today, up to 40 years of age, is 708 million people. That’s the result of crunching all these numbers from all these pyramids. In the United States, the population under 40 is 174 million. China has four times as many. This analysis is by Noah Smith, who took the time and did the work—God bless him—and concludes that China is actually in much better shape than anyone thinks. China’s current working generation is smaller than previous recent generations in China. But the next one coming is bigger. China’s population pyramid is starting to bulge out again, under the age of 15.

This is the population pyramid for the European Union. Their total, under age 40, is 209 million. Going to Canada, 19.3 million. Australia, 14.7 million people under the age of 40. What I’m doing now is adding up the United States and our closest allies, to see how many countries we need to get a young population that is as large as China’s. And we’re still not even close. The US plus the EU plus Canada plus Australia, if we can somehow get all these countries rowing in the same direction, carefully coordinating industrial and fiscal policy, we’re still 290 million young people short, compared to where China is right now.

And there’s another issue with that strategy, because China can play that same game too, and better. This is a map of the BRICS countries, and these countries DO coordinate trade and industrial policy, and supply chains and logistics and infrastructure investment. Brazil and Indonesia are BRICS countries. Brazil’s population under age 40 is 136 million. In other words, Brazil has just slightly fewer young people than we have in the United States. Brazil is worth 7 Canada’s. Indonesia—under age 40 is 179 million people, in Indonesia. Same as the US. When Indonesia joined the BRICS, it was the equivalent of adding the United States, in terms of productive population size. Indonesia’s young population is the equivalent to 12 Australia’s, and that’s showing up in economic growth numbers there. Australia’s economy is barely growing at all—0.2%, while Indonesia’s is booming—up 5%. Again--one of the most important drivers of economic growth is how many young people are in the population, with access to productivity tools to drive new industries forward. And almost all that growth is happening in countries like Indonesia and Brazil, where hundreds of millions of people are joining the middle class—Indonesia’s consumer class will grow by 27%, Brazil’s by 9%--and these percentages are off a far higher baseline than Canada or Australia, who don’t show up on this chart here at all. China’s population is falling, but their middle class is growing much faster. Say that again—China’s population is falling, but their economy is growing anyway, because of where the productivity gains are going.

There’s another big problem with just looking at top-line numbers, because Chinese retirees cost their economy less than American retirees do. Government pensions and entitlement benefits are a call—a demand—on the incomes of people who are still working. And government pensions in the United States are probably the highest in the world. There are two retirement programs in the United States for federal government employees, and about half of them are getting an average of $2100 per month ($2,126) and the ones under the Civil Service Retirement System are at $5,447 per month. Our government retirees are also eligible for social security benefits, and Medicare coverage, and the average entitlement is over $38,000 per year ($38,494). That’s population-wide, and those programs also cover retirees from the private sector. Social Security and Medicare spending in the United States is swallowing up everything else, the system is already broke, running massive deficits that just get bigger with time. Most Americans are aware of the deep fiscal problems we face, then we learn that China is aging faster than the United States, so we conclude that China must be going broke even faster than we are. But that’s where the thinking on that falls apart. But Chinese retirees cost their economy far less in the first place. Chinese government employees receive an average of under $1,000 per month. The average public benefit for private employees is about $535 a month, 3,742 renminbi. That is less than one-fifth the benefit payments paid out by the US Social Security and Medicare systems.

But even though Chinese retirees place a much smaller burden on government finances, policymakers here can flip a switch and reduce it even further, simply by raising the retirement age. Until recently the retirement age in China was 60 for men and even younger for women—here, China starts at the LOWEST baseline in the world. Push those age limits up, and a lot of their fiscal challenges go away. And that’s just what they’re doing. The higher retirement ages in China will reduce the burden—such as it is—on public finances. But the benefits to pushing up the retirement ages are actually much greater on the economic growth side, because the most experienced and knowledgeable productive labor in the Chinese economy are staying in their jobs for longer.

This is Foshan, the riverside park. Be Good.

Resources and links:

Visual Capitalist, The World’s Largest Consumer Markets in 2030

https://www.visualcapitalist.com/the-worlds-largest-consumer-markets-in-2030/

EPIC Explainer: The Federal Pension System

https://epicforamerica.org/education-workforce-retirement/epic-explainer-the-federal-pension-system/

What Is the Chinese Pension System and Why Are Its Problems Hard to Fix?

https://www.cfr.org/blog/what-chinese-pension-system-and-why-are-its-problems-hard-fix

BRICS expands with new partner countries. Now it’s half of world population, 41% of global economy

https://geopoliticaleconomy.com/2024/12/25/brics-expands-9-partner-countries-population-economy/

Population pyramid sources:

https://www.populationpyramid.net/indonesia/2024/

https://www.populationpyramid.net/brazil/2024/

https://www.populationpyramid.net/canada/2024/

https://www.populationpyramid.net/australia/2024/

https://commons.wikimedia.org/wiki/File:EU_27_%28from_2020%29_population_pyramid_in_2023_%282%29.svg

https://www.populationpyramid.net/united-states-of-america/2024/

https://www.populationpyramid.net/china/2024/

‘Reuters, China to raise retirement age to deal with aging population - media

https://www.reuters.com/world/china/china-raise-retirement-age-deal-with-aging-population-media-2023-03-14/

Population Decline: Impacts

https://climatechangefork.blog.brooklyn.edu/2023/03/07/population-decline-impacts/

China's demographics will be fine through mid-century

China's demographics will be fine through mid-century

Reuters, Indonesia's economy expands 5% in 2024, more rate cuts seen in bumpy 2025

https://www.reuters.com/markets/asia/indonesias-q4-gdp-5-line-with-poll-forecast-2025-02-05/

Australian National Accounts: National Income, Expenditure and Product

https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release