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Perceiving Truth and Ceasing Doubts
1) China has experienced unprecedented economic growth over the past 40 years since economic reforms began, with annual growth rates of around 9% leading to over a tenfold increase in living standards. 2) This rapid growth has been driven by China's demographic dividend as the working-age population increased and supported overall growth. However, China's dividend is disappearing as the population ages. 3) To maintain economic growth, China must transition from relying on its demographic dividend to implementing further economic reforms that can drive productivity and unlock new sources of growth, such as reforming the household registration system to increase labor mobility.
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Perceiving Truth and Ceasing Doubts
- 1. Perceiving Truth andPerceivingTruth and Ceasing Doubts:Ceasing Doubts: What Can We Learn from 40 Years ofWhat Can We Learn from 40 Years of China’s Reform and Opening-up?China’s Reform and Opening-up? Cai Fang Chinese Academy of Social Sciences
- 2. 1. How SignificantIs1. How Significant Is the China Miraclethe China Miracle
- 3. Confucius on AgesConfuciuson Ages The Master said: • At fifteen, I devoted myself to learn • At thirty, I stood firm in my carrier • At forty, I perceived truth and doubt ceased
- 4. While Applying toReform…While Applying to Reform…
- 5. Singing in theRainSinging in the Rain • Krugman has kept criticizing “model” of East Asia and of China, based on Young’s empirical works • “paper tigers”, “no miracle”, “not sustainable”, “hit a wall”…
- 6. First Time inHuman HistoryFirst Time in Human History Period Annual growth rate Life expectancy at birth Improvement of living standard The World Thousands of years before Industrial Rev. 0% Very low No change United Kingdom 1880-1930 0.9% 50 years 56% United States 1920-1975 2% 55 years nearly double Japan 1950-2010 4% 60 years Ten times China (to date) 1981-2011 8.8% Still alive Over ten times China (while completed) 1981-2049 If 8.8% continues 68 years Hundreds of times
- 7. 2. Demographic DividendIs2. Demographic Dividend Is the Necessary Conditionthe Necessary Condition
- 8. Two Processes CoincidedTwoProcesses Coincided 0 100 200 300 400 500 600 700 800 900 1000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Year s Population(Million) Wi ndow of oppor t uni t y Wor ki ng popul at i on Dependent popul at i on
- 9. Opportunity Window isUniqueOpportunity Window is Unique Devel oped count r i es 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Population(10thousands) Chi na 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Devel opi ng count r i es 0 50000 100000 150000 200000 250000 300000 350000 400000 450000 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Per i od WAP DP
- 10. Population DriversPopulation Driversof Growthof Growth
- 11. Potential and ActualGrowthPotential and Actual Growth 9.7 10.3 0 2 4 6 8 10 12 14 16 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Annualgrowthrate(%) Act ual gr owt h r at e Pot ent i al gr owt h capaci t y
- 12. 3. Demographic Dividend3.Demographic Dividend Is Vanishing RapidlyIs Vanishing Rapidly
- 13. China Has EnteredNew StageChina Has Entered New Stage 0 100 200 300 400 500 600 700 800 900 1000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Year s Population(Million) Wi ndow of oppor t uni t y Wor ki ng popul at i on Dependent popul at i on
- 14. Growing Old beforeGetting RichGrowing Old before Getting Rich 2010 15 10 5 0 5 10 15 0- 4 5- 9 10- 14 15- 19 20- 24 25- 29 30- 34 35- 39 40- 44 45- 49 50- 54 55- 59 60- 64 65- 69 70- 74 75- 79 80+ Ages Shar e（%） Rest Chi na 1990 15 10 5 0 5 10 15 0- 4 5- 9 10- 14 15- 19 20- 24 25- 29 30- 34 35- 39 40- 44 45- 49 50- 54 55- 59 60- 64 65- 69 70- 74 75- 79 80+ Ages Shar e（%） Rest Chi na 2000 15 10 5 0 5 10 15 0- 4 5- 9 10- 14 15- 19 20- 24 25- 29 30- 34 35- 39 40- 44 45- 49 50- 54 55- 59 60- 64 65- 69 70- 74 75- 79 80+ Ages Shar e（%） Rest Chi na 2020 15 10 5 0 5 10 15 0- 4 5- 9 10- 14 15- 19 20- 24 25- 29 30- 34 35- 39 40- 44 45- 49 50- 54 55- 59 60- 64 65- 69 70- 74 75- 79 80+ Ages Shar e（%） Rest Chi na
- 15. Unit Labor CostCatching UpUnit Labor Cost Catching Up 20 24 28 32 36 40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Chinaas% Ger many Japan Kor ea USA
- 16. Slowdown of HumanCapitalSlowdown of Human Capital 0 400 800 1200 1600 2000 2400 2800 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Newentrantsbyeducation 205 210 215 220 225 230 235 240 245 250 Incrementoftotalyearsofeducation Gr ad. Uni v. S Hi gh J Hi gh Pr i m. I ncr ement H
- 17. Diminishing Return toCapitalDiminishing Return to Capital 12 15 18 21 24 27 30 33 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 年份 资本回报率（%）
- 18. Stagnation of LaborMobilityStagnation of Labor Mobility 27 28 29 30 31 32 33 34 35 36 37 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 16-19ruralpopulation(mil.) 60 80 100 120 140 160 180 Migrantworkers(mil.) 16- 19 r ur al popul at i on Mi gr ant wor ker s
- 19. Slowing Potential &Actual GrowthSlowing Potential & Actual Growth 6.2 7.6 10.3 0 2 4 6 8 10 12 14 16 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Annualgrowthrate(%) Act ual gr owt h r at e Pot ent i al gr owt h capaci t y
- 20. 4. Demographic Dividend4.Demographic Dividend to Reform Dividendto Reform Dividend
- 21. Areas of GainingReform DividendAreas of Gaining Reform Dividend Fields to reform Supply-side effects Demand-side effects Where to make efforts Household registration system Promote labor mobility and increase labor supply Expand domestic consumption Share reform costs between central and local governments State-owned enterprises Increase in total factor productivity by allowing creative destruction De-leveraging Encourage competition; strengthen social protection Education and trainings Improve human capital Narrow income gaps and increase social mobility Equalize opportunities; extend years of schooling Population policy Increase fertility and balance population development Cope with population aging Lower family costs of bearing children Public fiscal system Mitigate burdens of families and firms Expand middle-income group Strengthen redistribution Financing and banking system Maintain monetary neutrality and prudent policy Stabilize demand Monetary policy retreats from industrial policy
- 22. HukouHukou Reform asan ExampleReform as an Example 0 10 20 30 40 50 60 70 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Urbanizationrate(%) de j ur e de f act o
- 23. Reform Makes DifferenceReformMakes Difference 2. 00 3. 00 4. 00 5. 00 6. 00 7. 00 8. 00 9. 00 10. 00 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2. 00 3. 00 4. 00 5. 00 6. 00 7. 00 8. 00 9. 00 10. 00 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2. 00 3. 00 4. 00 5. 00 6. 00 7. 00 8. 00 9. 00 10. 00 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2. 00 3. 00 4. 00 5. 00 6. 00 7. 00 8. 00 9. 00 10. 00 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049
- 24. Thanks for AttentionThanksfor Attention