When the abundance ends: Economic transformation, population aging, and shrinking lifecycle surplus in China

China’s age of abundance, driven by rapid increases in labor income and a favorable population age profile, generated a sizable surplus of historical proportions. Using the National Transfer Accounts (NTA) approach, this study updates results published in this journal a decade ago. It traces changes in labor income and consumption patterns in China in the 2010s, and compares them with those in the decade prior. Our results report significant shifts in income and consumption patterns over the two decades. With economic growth and income increase slowing down, and consumption growth increasing faster than income growth in the second decade of the twenty-first century, the sizable national total of the lifecycle surplus observed in the decade earlier shrank sharply in the 2010s. A decomposition analysis reveals that while the vast majority of shrinking in the national total of the lifecycle surplus is attributable to shifts in income and consumption profiles, demographic changes also played a substantial role. As China exits its age of abundance and as its population ages at an accelerating pace, the national total of lifecycle surplus that came with this age is also quickly diminishing. Our projection exercises show that, combined, the new economic lifecycle patterns and population aging could deplete China’s lifecycle surplus with a decade’s time, a change that poses unforeseen challenges to policymakers and the public alike in China.