Author: Vikram Nehru, Carnegie Endowment

Over 30 years since launching its one-child policy, China’s demographic dividend is abruptly coming to an end.

Not only is the Chinese labour force set to decline in absolute terms, the old-age dependency ratio (the number of people above the age of 65 for every person of working age) is expected to double over the next two decades, reaching the level of Norway or the Netherlands by 2030. Read more…

Author: Amitendu Palit, ISAS, Singapore

Chinese and Indian demographies will be rather different three decades hence. What kind of economic outcomes are the differences expected to create?

With 1.4 billion and 1.2 billion people respectively, China and India currently account for 37 per cent of the world population. Thirty years later, they are expected to account for roughly the same share of world population. The overall numbers, however, hide some fundamental changes that will have occurred by then. Read more…

Author: Ligang Song, ANU

China has succeeded in moving up the ladder of development through rapid growth in just three decades. The pace of China’s growth is not what is unique — Korea, Singapore and other economies in East Asia grew as fast in the 1970s and 1980s. What is unprecedented historically is its scale. The size of China’s population, market and geography, and the dynamism that flowed from economic reform and transformation are what define its impact on the rest of the world. Despite a still relatively low per capita income, the sheer size of the Chinese economy has made China a significant player in world production, consumption, trade and increasingly international finance and the environment.

The dynamics unleashed by Deng’s reform, the opening up policies and institutional changes have propelled continuous capital accumulation, productivity gains, trade and income growth on a scale the world has never seen before. Read more…

Author: Kazumasa Iwata, ESRI, Tokyo

In 2005, former Federal Reserve Chairman Greenspan noticed the insensitivity of long-term interest rates to changes in short-term interest rates, and called it the ‘conundrum of the long-term interest rate’. His successor Ben Bernanke shed light on this puzzle by pointing out that the balance between saving and investment shifted towards a tendency to excess saving after the Asian Currency Crisis in 1997-98, despite the boom in the world economy after the IT bubble burst. High growth combined with low real long-term interest rates created the macro-economic circumstances that were conducive to the emergence of economic bubbles.

This gave rise to a controversy between the US and Chinese governments on the cause of sequential bubbles. The then Treasury Secretary Paulson pointed out that to the extent that the capital inflow from China contributed to lowering the nominal long-term interest rate in the US, China had joined the process of generating bubbles. The Chinese government blamed the US for its irresponsibility in allocating the flow of funds available to US investors. Chairman Bernanke admitted in April that the US should have used capital flow from abroad in a more productive way. If we look at the movement of the US long-term real interest rates (the interest rate on ten-year government bonds minus the rate of change in consumer prices, we see that it peaked out in the mid-1980s, and then declined gradually until 2008.

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