To What Extent Can Urbanisation Mitigate the Negative Impact of Population Ageing in China?

Bruegel | Working Paper | Issue 17/2023 | 05 October 2023

13 Pages Posted: 5 Feb 2024

See all articles by Alicia García-Herrero

Alicia García-Herrero

Bruegel; Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS); Natixis

Jianwei Xu

Bruegel

Date Written: October 9, 2023

Abstract

China is experiencing population ageing caused by a rapidly declining fertility rate and increased life expectancy. This demographic transition poses economic challenges, yet the intensity of these challenges depends on a number of factors, with the move of people from rural to urban areas being of central importance.

To gain a clearer understanding of how urbanisation interacts with population ageing, we investigate changes in the Chinese labour force in both rural and urban areas. Our findings suggest a modest shrinking of the overall labour force up until 2035. However, until 2035, the labour force is projected to contract only in rural areas, while the urban labour force will continue to grow. As urban employment is more productive than rural employment, the combined effect of demographic change and urbanisation on growth will remain moderately positive (0.4 percent per year).

Beyond 2035, fertility rate decline will begin to affect the working-age population in both rural and urban areas, especially since the urbanisation process is expected to level off by then. In such circumstances, China’s shrinking population will shave off 1.4 percent from GDP growth annually. These results, however, do not take into account the impact of population aging on labour productivity. China’s fast move towards robotisation and artificial intelligence might help mitigate any negative impacts by increasing productivity, but there is no sign yet that this is the case.

Suggested Citation

Garcia-Herrero, Alicia and Xu, Jianwei, To What Extent Can Urbanisation Mitigate the Negative Impact of Population Ageing in China? (October 9, 2023). Bruegel | Working Paper | Issue 17/2023 | 05 October 2023, Available at SSRN: https://ssrn.com/abstract=4689809 or http://dx.doi.org/10.2139/ssrn.4689809

Alicia Garcia-Herrero (Contact Author)

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

Natixis ( email )

France

Jianwei Xu

Bruegel ( email )

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