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The Coming Demographic Impact on China's Growth: The Age Factor in the Middle-Income Trap

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  • Fang Cai

    () (Institute of Population and Labor Economics, Chinese Academy of Social Sciences)

Abstract

Thanks to successful economic growth, social development, and strict implementation of family planning policies, the demographic transition in China has been accomplished at a much earlier stage of development than in other countries. I call this outcome “aging before affluence.” As a result of this demographic transition, China has already passed through its Lewis turning point, and its demographic dividend from the decline in the population dependence ratio is about to end. I identify a potential nexus between “aging before affluence” and the “middle-income trap.” China is losing comparative advantage in labor-intensive industries, but China is not ready to gain comparative advantage in technology-intensive and capital-intensive industries. For China to avoid the middle-income trap, it must (1) transform economic growth to a consumption-driven pattern; (2) shift the labor-intensive industries to the central and western regions; and (3) speed up technological catching up. © 2012 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Fang Cai, 2012. "The Coming Demographic Impact on China's Growth: The Age Factor in the Middle-Income Trap," Asian Economic Papers, MIT Press, vol. 11(1), pages 95-111, Winter/Sp.
  • Handle: RePEc:tpr:asiaec:v:11:y:2012:i:1:p:95-111
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    References listed on IDEAS

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    Cited by:

    1. Françoise Lemoine, 2013. "From foreign trade to international investment: a new step in China’s integration with the world economy," Economic Change and Restructuring, Springer, pages 25-43.
    2. Jane Golley & Rod Tyers & Yixiao Zhou, 2016. "Contractions in Chinese Fertility and Savings: Long-run Domestic and Global Implications," RBA Annual Conference Volume,in: Iris Day & John Simon (ed.), Structural Change in China: Implications for Australia and the World Reserve Bank of Australia.
    3. Andrea Fracasso, 2015. "Economic Rebalancing and Growth: the Japanese experience and China’s prospects," DEM Discussion Papers 2015/07, Department of Economics and Management.
    4. Jane Golley & Rod Tyers, 2012. "Gender 'Rebalancing' in China: A Global-Level Analysis," CAMA Working Papers 2012-46, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    5. Prema-chandra Athukorala & Zheng Wei, 2015. "Economic Transition and Labour Market Dynamics in China: An Interpretative Survey of the ‘Turning Point’ Debate," Departmental Working Papers 2015-06, The Australian National University, Arndt-Corden Department of Economics.
    6. Ozturk, Ayse, 2016. "Examining the economic growth and the middle-income trap from the perspective of the middle class," International Business Review, Elsevier, pages 726-738.

    More about this item

    Keywords

    Lewis turning point; demographic dividend; middle-income trap;

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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