Worry over China’s demographic dividend unnecessary (2)

Panic over the inflection point of demographic dividend is unnecessary

The disappearance of the demographic dividend will lead to labor shortages, rising labor remuneration, heavier social burden and other negative impacts that hinder economic growth. But everything coin has two sides. Experts said it is unnecessary to panic over the inflection point of the demographic dividend. It is not necessarily a bad thing but on the contrary, it will create new opportunities for economic development.

"The first time disappearance of China's demographic dividend is not that horrible. On the contrary, it will form a 'reversed transmission of pressure' mechanism to accelerate the transformation of China's economic development and social development," said Zhang Monan.

The key to the transformation is to transfer the economic growth mode from relying on the inputs of capital and labor to relying on total factor productivity gains. By learning lessons from the successful transformation experience of the world's major economies, Cai said, their experience suggests that as demographic dividend disappears and the "Lewis Inflection Point" is crossed, the source of China's economic growth in long term will eventually transform in growing mode and rely basically on technological progress and productivity gains.

At the same time, China still has huge potential in developing secondary demographic dividend. Cai Fang said that this type of demographic dividend includes three main sources. First, it stems from the demand and system supply for old-age security. Once we have established an old-age security system with an accumulation function rather than relying mainly on family pension or the pay-as-you-go system, we can take advantage of the workers' pension expectations, savings motivation as well as added value in the capital markets to keep high savings rate. The second source is the expansion of educational resources; and the third is the expansion of the participation rate of the labor force.

Read the Chinese version at: “人口红利”拐点无需悲观解读, Source: People's Daily Overseas Edition, Author: Luo Lan

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