PART TWO: A CRASH STALKS THE BOOM
The buzz on China today is all boom: a tsunami of double-digit annual growth, enormous construction projects and high-velocity industrialization. It has propelled an impoverished Third World nation to the planet's second-largest economy in two frenzied decades.
Almost no one in the West was prepared for the Chinese miracle, which was greeted with astonished admiration until a few years ago and is now widely regarded with consternation, rage and fear. As recently as the mid-1990s, most experts were predicting that the modernization of China's economy would take at least half a century.
What even fewer observers are prepared for is the possibility of a Chinese crash, with devastating consequences.
The reason for worry lies in blunt demographics. History's most populous nation is also its fastest-aging, with a plummeting labor supply and a senior community that will exceed an astonishing half-billion people by mid-century.
The Chinese boom – as well as its possible collapse – is the tale of a single bureaucratic decision, taken in a then-isolated and backward country, that retracked the world economy in one generation and now stands to derail it in the next.
TWO BILLION HANDS TO CARRY GUNS
The tale was set in motion in the late 1970s, when China was suddenly transformed from a socialist baby machine into a gargantuan capitalist production line for retirees.
Mao Zedong, who founded and led the Peoples Republic of China until his death in 1976, believed that war was inevitable with two bitter enemies, Washington and Moscow, both of them far superior to Beijing in military technology. Convinced that numbers were his only asset, Mao made large families a cornerstone of state policy. "Every new mouth to feed also brings two hands to carry a gun," he proclaimed.
The fertility rate reached more than six children per woman, and the overall population nearly doubled, from 540 million in 1950 to more than a billion in 1978.
Within eighteen months of Mao's death, he was succeded by the pragmatic Deng Xiaoping and the baby machine was brought to a abrupt halt. Faced with a population caroming entirely out of control – at the Maoist rate, it would have surpassed 2 billion people by the late 1990s – Deng imposed a one-child-per-family limit that has held ever since.
Almost overnight, the fertility rate plunged to less than 1.5 children per woman. No nation in history has experienced a more sudden, spectacular dive in its demographic curve.
The Chinese economic miracle was the shortterm pay-off. The specter of two billion mouths to feed was avoided. And supplied for the moment with an inexhaustible pool of young workers, China fervently embraced entrepreneurial capitalism, labor-intensive manufacturing and foreign trade.
The critical element, the boom's lynchpin, was the labor pool. Put simply, today it is drying up.
WHERE ARE THE WORKERS?
In the spring of 1997, when I was covering a political story in Canton, I found the city's main railroad station engulfed day and night by migrants looking for jobs. Thousands of young men and women from the rural villages of Hunan and Sichuan provinces hunkered down on the station square, hoping a factory employment scout would show up, or halted passersby to plead for a day's work.
By 2005, the locus of desperation had visibly shifted from worker to employer. On an assignment for National Geographic that took me down most of the prosperous east coast, ending up once again in Canton, I was greeted at every turn by factories draped in "Help Wanted" banners. Personnel officers in China's manufacturing heartland now count themselves lucky if applicants show up for 20 percent of advertised employment openings, despite ever-swelling salary packages sweetened with bonuses, subsidized housing and free meals.
According to a recent survey by the Development Research Center of the State Council in Beijing, 74 percent of the nation's villages have no excess workers looking for factory jobs. A study released by the Chinese Academy of Social Sciences predicts that the supply of workers in the remaining quarter of rural villages will vanish in the next two years, and that China will face a nationwide labor shortage from 2010 on.
In effect, Beijing has only two choices. It can do nothing and watch its currrent prosperity collapse, probably with a bang rather than a whimper. Or it can launch a second economic revolution, abandoning labor-intensive manufacturing to move up the production chain, as Japan and Germany did two generations ago.
Yet due to the demographic plunge, the labor crunch will be most severely felt in the educated middle class – among the very young people who would serve as managers and technicians in an upgraded Chinese economy.
Already, the shortage of qualified applicants in such occupations as finance, accounting, engineering, and business "represents a major problem for multinationals in China, for Chinese companies, and for the country's policy makers," according to the international business consultancy McKinsey & Company.
One result is galloping wage hikes, with salaries across-the-board doubling in real terms every 6-8 years. Another is that Beijing is itself experiencing a new version of the "Chinese problem:" the flight of manufacturing enterprises to such countries as Vietnam, Indonesia and the Philippines, where basic wages are as little as one-third the soaring norm in China.
But the far more serious threat to China's well-being, and to the global economy in which it plays a vital role, lies in the yawning gap between the minimalist family imposed by Deng and the pre-1976 population explosion inherited from Mao.
4-2-1: THE NIGHTMARE
The Chinese refer to it as "the four-two-one nightmare:" the prospect that four only-child retired grandparents and two only-child retired parents will all have to be supported by a single worker.
China had less than 90 million citizens aged 50 or older when Mao took power in 1949, roughly 15 percent of its total population. Today it has an estimated 300 million. By 2050, according to UN estimates, it will have more than 600 million, 42 percent of its population. Meanwhile, the nation's population of children and working age adults will have dropped by 165 million from the level of 1995.
Numbers in China are always dizzyingly big, but these are plain terrifying.
They put Chinese planners in an impossible double-b
ind. Their nation will remain seriously overpopulated into the second half of this century. But it will also be phenomenally older, and necessarily less productive and needier.
The aging problem argues for efforts to increase the fertility rate, another policy reversal. But in a national survey three years ago, researchers at Beijing's Renmin University found that larger families had lost their appeal for the Chinese. Quality health care, comfortable housing and a good education, the lifestyle pillars of China's burgeoning middle class, are increasingly expensive, points out Mu Guangzong, a demographer at the university's Institute of Population Research. Even in rural districts where experimental programs encouraged farmers to have two children unconditionally, Mu says, very few parents took up the challenge.
Sound familiar? It's precisely the rationale that led couples in affluent America, Western Europe and Japan to opt for nor more than one or two children.
The upshot in China is a furious government debate over what to do, with recognition that the one-child limit is now backfiring set against a deep relectance to changing it.
The debate's subtext can be read on billboards all over the country, where the stark birth-control mottos of Deng's time -"Raise fewer babies but more pigs" and "One more baby means one more tomb" – have been replaced by the ambiguous "Both boys and girls are in their parents' hearts."
CRISIS LOOMS FOR THE LITTLE EMPERORS
That last plea carries a subtext of its own. Contemporary China has too few women of child-bearing age to offset the fertility plunge, whatever the policy-makers decide.
In a peculiar marriage of ancient tradition, which emphasizes the importance of sons, and modern medical technology that identifies the gender of fetuses, what remains of the Chinese baby-machine is overwhelmingly devoted to producing xiao huang di – the adored and pampered boys known popularly as "little emperors."
According to the China's Family Planning Association, 99 cities had gender ratios above 125 boys for every 100 girls under four years old in 2006. The United Nations cites a gender ratio of more than 107 as risky. In Lianyungang, a major port on the east coast, the ratio last year was 163.5 boys for every 100 girls. The principal cause was abortions of female fetuses, the Association reported.
In January, the authorities in Beijing warned of dire social instability if tens of millions of single men are unable to find mates.
Beijing's critics in the West might be tempted to smug satisfaction over this dilemma, were it not for a most uncomfortable truth. Like the United States, the European Union and Japan, China today is one of the essential motors that drive the global economy.
Even aside from the peril of social chaos, a full-blown labor crisis in China would put enormous upward pressure on prices around the world, from consumer products to the interest rates on home loans, say economists.
Like it or not, those who fear and decry the Chinese miracle would do better to pray for its health.
– Frank Viviano – barganews staff reporter –
PART ONE: GULAG OR MIDDLE-CLASS DREAM?
