China’s Demographics and Growth Potential in an Age of Machine Knowledge Capital

Abstract

The results of China’s recent census, which showed a continued slowing in population growth triggered much discussion of the implications for China’s economic growth potential and knock-on implications for debt sustainability. Demographic projections show a rapidly aging population, implying a growing burden on the working-age population and, as population decline sets in, risks for debt sustainability. However, China has numerous margins along which to make adjustments to compensate, including raising labour force participation, continued increases in human capital as each new cohort entering the labour force over the coming decade at least will have a substantial human capital edge over the exiting cohort, continued improvement in the utilization of knowledge as its knowledge-based and data-driven economy continues to mature, and perhaps most importantly, it is in a position to deploy cutting-edge robotics and artificial intelligence applications as the world moves into an age of machine knowledge capital. I conclude that demography is not destiny and indeed that China picked a good time to grow old.

Keywords: China, demographics, working-age population growth, labour force participation, human capital, school enrolment, robots, machine knowledge capital, productivity, debt sustainability

JEL Classification: J21, J24, J26, O30