Is China's Growth Being Hampered by an Ageing Population and High Debt?

New Delhi, Aug 17 (NationPress) China is likely to encounter significant economic challenges in the years to come, primarily due to its ageing population and escalating government debt, as indicated by various reports.

The burden of high government debt leads to increased interest expenses and diminishes the fiscal space needed to respond to economic shocks. Concurrently, an ageing population results in higher expenditure on pensions and healthcare, according to a report in Newsweek.

Both the Chinese and US governments rank among the most indebted globally. The gross debt of the US government stands at 123% of its GDP, based on data from the International Monetary Fund.

China's debt level is at 84%, fueled by debt-driven growth during the 2010s and a struggling housing market that has left local governments heavily indebted. A report from London-based global advisory firm Oxford Economics forecasts a potential halving of China’s economic growth by the 2050s.

As stated in the Newsweek report: 'Soaring pension and healthcare expenses are the most pressing policy challenge of the 2020s across all advanced economies and many emerging markets.'

According to a United Nations report, China currently has a median age of about 40, significantly above the global average, and this is expected to rise to 52 by 2050—much higher than the US median age, projected to remain around 41.

The old-age dependency ratio in China, which measures the proportion of individuals aged 65 and older, is anticipated to increase by over 50 percentage points by 2026 compared to 2010, contrasting with a rise of about 8-10 points in the United States. This situation will place additional pressure on China's modest social safety net. If the country fails to address its declining birth rate, the burden will fall on a progressively smaller workforce, according to the Newsweek report.

Jed Cartledge, an economist and one of the authors of the Oxford Economics report, suggests that this demographic trend positions the US more favorably. China's fertility rate is projected at 1.2 births per woman, one of the lowest globally.

In comparison, the US rate is 1.6 births, still below the 2.1 needed for natural population sustainability. However, historically, immigration has helped mitigate declining birth rates in the US.

'While US immigration has faced challenges during the second Trump presidency, we anticipate that the decline in net immigration will only persist through the remainder of his term before returning to the pre-pandemic rate of 1.1 million annually,' Cartledge informed Newsweek.