Growing old

Five decades after Mao kick-started a population explosion by reminding the nation that "the more people, the more power", China faces an enormous demographic challenge.

In the 1950s, the country's population was about 500 million. By the 1970s the number swelled to more than 900 million.

In the face of exploding numbers, Beijing moved to reverse the trend with a "later-longer-fewer" policy – later marriage, longer intervals between births and fewer children – and the one child policy.

It worked. Population growth dwindled from more than 2% per year to less than 1% in 2000.

But now there is evidence to suggest that these policies may have worked too well. The fast demographic growth followed by a quick reversal have created a population that may be too old to sustain.

China's 2000 census found 10% of its people are aged 60 or over. By 2035, about 20% of the population will be over 65. According to UN standards, China is an "aging society".

In some ways, however, this aging may work in China's favor.

Speaking at a function in Hong Kong in early November, UBS chief Asia economist Jonathan Anderson said the trend may help solve China's chronic need to find new jobs for a never-ending horde of underemployed workers.

"It's not that China is running out of workers. It is running out of young workers," he said. The upside is that "for the next 10 years China doesn't need to generate 10 million jobs. It needs to generate 1 million jobs."

However, the same demographic factors that may have solved one problem for Chinese leaders also pose a host of different challenges.

Dividend turned deficit

China is still benefiting from a "demography dividend" generated by the baby boomers of the 1970s and then the one child policy. They have combined to create a working population with siblings to help carry the parental load and less offspring to support.

But this dividend may turn into a deficit as the burden of caring for the old increases on each working individual with fewer siblings and more elderly relatives. In China, 60-year-old women have an average of three children. In 20 years they will have only one.

Demographic challenges are not unique to China. They are a global phenomenon but one which is obviously felt most keenly in mass-population countries such as India and China.

Indeed, India, currently trailing China in terms of growth and development, may have the edge over its Asian neighbor as far as people go. In the early 1950s both countries had a fertility rate of about 6 children per woman. By 2000, China's was about 1.7 while India stayed at around 3.4.

The country never imposed a mandatory population control policy but advocated family planning.

The relative slow decline of fertility may put India on track to overtake China by 2030 in terms of population, according to the UN's 2005 World Population Prospect. India's population will also age in the next two decades but the median age is likely to remain at just over 30, compared to China's 43.

Uneducated masses

But it's not all good news for New Delhi. Mass illiteracy plagues the country; only 47% of children make it past the fifth grade, compared to 98% in China, according to a 2004 Morgan Stanley report. This pressures India's leaders to put more public money in places where it can make the most of the country's youthful population.

China faces a different problem. It simply may not have enough money to care for its older people.

Goldman Sachs estimates that annual per capita income will be a little more than US$11,000 by 2030 (at current prices). Japan hit almost US$36,000 last year.

Chinese workers 65 or older are six times more likely to be illiterate or semiliterate than the overall workforce, 50% more likely to have only primary education, and only a tenth as likely to have a high school or college diploma, according to Nicholas Eberstadt in Policy Review.

More than that, the World Bank estimates that China's social safety net covers less than 15% of the working population.

So far, Beijing has yet to revise its 25-year-old one child policy. Instead it has relaxed the criteria needed to have a second child to the point where about 30-40% of the population is eligible.

This is a start but more may need to be done before Chinese parents realize that a single child is not necessarily a good thing. The problem is that the window of opportunity is small and, unlike restrictions that can be controlled, women cannot be forced to have children.