In the last three decades, China has undergone profound transformation both population wise and economically. The decline in the mortality rates in China caused a rapid population growth which, attracted the intervention of policy makers to put in place restrictive population policies based on the view that population growth has adverse effects on per capita income of the population.
In a bid to improve the standards of living of the Chinese population and slow the population growth rate, China’s leaders in 1980 developed the One Child Policy per couple. Economically, China has transformed from a socialist closed economy to a market based economy becoming one of the fastest growing economies in the world.
During the last three decades, the demographic trends favored economic development due to low dependency ratio and a large number of working population but with the new policy, old age dependency will affect the economic growth. The traditional view that high population growth has adverse effects on economic growth may not be entirely true. Population policies, labor mobility, and migration have affected China’s economic development positively over the last three decades.
Population policies and Economic Development in China
China’s adoption of One-Child policy led to a decline in the population growth rate (Chan, 1994, p.46). Because of this policy, population growth rate in the mainland China declined from 1.9% in 1949-1982 to 0.6% in 2000-2010 and led to a change in the age structure of the population, which caused an impact on the Chinese economy over the past three decades.
The decline in fertility from an average TFR of 4.2 in 1981 to 2 in 2000 meant that age groups with low productivity and high consumption reduced while the productive population increased at a faster rate leading to an increase in the rate of per capita income.
However, as the demographic transition proceeds, the growth of the working population will decline compared to that of the total population leading to more old-age population and eventually affect the per capita output of the population.
During China’s economic transition, the demographic changes affected economic development. The uneven regional economic developments led to the mass migration especially to the eastern costal areas of China with a high economic growth rate (Chan, 1994, p.49).
There was massive rural-urban migration in the post-reform China caused by economic growth. In 1958, China designed a system (hukou system) to control the population migration and labor mobility across its regions in order to develop a market economy (Whalley, & Shuming, 2004, p.6).
The public security bureaus restricted place-to-place migrations while the movement of labor and personnel was also limited. However, in the early 1990 China adopted various measures to encourage labor mobility across the regions and further relax the hukou system.
Labor mobility and Economic Growth
Since 1990, income disparities between the eastern, central, and western regions of China have widened making coastal cities such as Beijing to account for much of China’s exports. The high economic growth rate coupled with the relaxation of restrictions of labor movement, has attracted massive flow of labor to these regions, which has in turn stimulated economic growth.
The rural-urban migration accounted for much of the migrants in China (40.7% of all migrants in 2000) and much of these migrants move to the economically powerful eastern regions. It is estimated that the use of labor mobility from rural agricultural-based sectors to urban industrial sectors contributed 16% of China’s economic growth from 1978 to 1995 (Chan, 1994, p.104).
Cia and Dewen found that the human capital played an important role to bring about the rapid economic growth witnessed between 1978 to1997 (2002, p.201). Increased labor mobility and rural-urban migration since the 1990’s in China promoted economic development but increased income disparities between rural and urban regions.
Migration and Economic Growth
The migration patterns in China occurred in three ways; planned hukou migrants, permanent migrants with or without hukou and the “floating” rural labor force (Whalley, & Shuming, 2004, p.11). Migration affected the demographic characteristics of urban population in terms of gender, age, and education level.
This reduced the dependency-ratio of the urban population since majority of the rural-urban migrants are young. The restrictions of the hukou system affected the age structure of the urban migrants by discouraging migrants from moving with their families to the cities. China still has labor surplus of mainly the older generation in rural areas.
Over the past three decades, China has undergone tremendous transformations economically attributed to demographic changes. The reforms adopted in the 1980’s allow labor mobility, human capital accumulation, and rural urban migration, stimulated rapid economic growth in China. However, challenges involving population structures that have more old-age dependants and the shortage of young labor will affect the economic development prospects over the next few decades.
Population policies saw the reduction of the unproductive generation thus cutting down on dependency. Labour mobility and migration also reduced the dependency rate thus fostering economic growth greatly. For instance, migration of young people from rural areas to urban centers coupled with the hukou policy reduced dependency rate by a great margin.
Cia, F., & Dewen, W. (2002). “Regional disparity and economic growth in China: The impact of labour market distortions,” China Economic Review 13: 197-212.
Chan, K. (1994). Cities with Invisible Walls: Reinterpreting Urbanization in post-1949 China. Hong Kong: Oxford University Press.
Whalley, J., & Shuming, Z. (2004). “Inequality change in China and (hukou) labour Mobility restrictions.” NBER Working Paper 10683. National Bureau of Economic Research.