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Time is running out for Beijing to prepare its economy for a ‘great demographic unknown’

China is growing fast — but the workforce powering its economic rise is shrinking.

Census data released Tuesday showed that China’s total population rose by 5.8% over the past decade — the slowest pace of growth since at least the 1960s. It also showed the country’s labor force is getting smaller. The number of people aged between 15 and 59 dropped below 900 million to about 63% of the population — down some 7 percentage points from a decade earlier.

That could spell bad news for the world’s second-largest economy, as it draws ever closer to overtaking the United States.

Lin Yifu, a government adviser and former World Bank chief economist, predicted at a government forum in March that could happen as early as 2030 — if it maintains an annual growth rate of between 5% and 6% over the next decade.

An accelerated drop in the labor force could make that tough.

China’s labor force could shrink by about 5% over the next decade, according to calculations by Yue Su, an economist at the Economist Intelligence Unit in London. “The likely consequent drop in the labor force, which has been falling since 2017, will place a cap on China’s potential economic growth,” Yue said Tuesday. “The demographic dividend that propelled the country’s economic rise over recent decades is set to dissipate quickly.”

For context, with 13.5% of its people now aged 65 or above, China has as many elderly people as Japan in the early 1990s — the beginning of three lost decades of economic stagnation for that nation. But China’s current GDP per capita — a broad measure of a country’s standard of living — is just $10,504, compared to Japan’s $31,465 in 1992, according to World Bank data.

“The brutal fact is that China is aging rapidly,” said Larry Hu, chief China economist for Macquarie Group, in a research report on Tuesday. “A more brutal fact is that China is getting old before getting rich.”

Demographics is not China’s only challenge. The country’s post-coronavirus recovery plan has relied heavily on government support, and a slew of bankruptcies and loan defaults at state-run firms have strained debt markets.

There are also enormous political risks. Clashes over Hong Kong and alleged human rights abuses in China’s Xinjiang region have exacerbated tensions with the West, and threaten to hurt efforts to build global partnerships.

But Ning Jizhe, head of the statistics bureau, sees the aging population as an opportunity, not just a challenge, since there will be more demand for consumer goods and technology geared toward the elderly. He also suggested that “younger elderly” could continue to work — although suggestions to push back China’s relatively young retirement age have proved controversial.

Analysts at Citi agreed that there was opportunity in the grey dollar, but warned that caring for the elderly brings with it an escalating financial burden.

“In short,” the analysts wrote, “China is leaping into a great demographic unknown in the coming generation.”

Around Asia

The business of China: Meituan’s poetic woes

Chinese delivery giant Meituan lost tens of billions of dollars in market value late last week, further rattling an already on edge tech industry.

This time, though, the offense was a thousand-year-old poem.

The firestorm erupted after Meituan founder and CEO Wang Xing posted a Tang dynasty-era poem on social media last Thursday.

Chinese poet Zhang Jie wrote “Pit of Books Burned” to satirize Qin Shi Huang, who proclaimed himself the first “emperor” of a unified China in 221 BC.

Qin was said to have quashed dissent by digging huge pits and burning books that were not approved by his government, and well as burying scholars to discourage people from critiquing his rule.

Some questioned whether Wang posted the poem as a veiled shot at the leadership in Beijing, which is currently reining in some of the country’s biggest tech giants.

Meituan confirmed the post in a statement to CNN Business, adding that Wang later added a clarification — one that explained he was referring to Meituan’s industry competitors.

The fracas over the poem has underscored the precarious position facing Chinese tech companies like Meituan. Shares in the company plunged some 13% from Thursday through Tuesday, wiping out nearly $30 billion in market value. (The stock has since rebounded, and was last up nearly 3% Wednesday).

The controversy comes at a tense time for the tech giant.

Last month, it was summoned by the People’s Bank of China for talks with banking and securities regulators. And on Monday, Meituan was called once again to speak with industry watchdogs in Shanghai about consumer rights, according to the Shanghai Consumer Council.

“The poem is so evocative, and Wang Xing posted it at such a critical moment of the big tech crackdown. This is indeed an inappropriate act,” one person wrote on the Twitter-like website Weibo earlier this week. “Wang probably meant his competitors. But apparently investors don’t take it that way. Now is a very sensitive moment.”

Quoted and noted

“We will decide our foreign policy … What we do or do not do will be for the benefit of the people of our country, on the basis of our principles. We will decide. They can say whatever they want.”

Bangladesh Foreign Minister AK Abdul Momen hit back at China after the country’s ambassador warned Dhaka against joining the Quad, an informal alliance of the United States, India, Japan and Australia, which has been put forward as a potential “Asian NATO.”

KFC bandits jailed

Five students in eastern China were jailed for fraud after they used a loophole in KFC’s mobile app to get over $30,000 in free meals.

According to the state-run Global Times, a man surnamed Xu found the loophole in April 2018, and not only treated himself but undercut the fried chicken chain to sell items for a profit. He also taught four friends how to exploit the loophole. Between April and October 2018, the paper reported, Xu and his friends caused up to 200,000 yuan in damages to the company, or around $30,000.

This week, a court in Shanghai jailed Xu for two-and-a-half years and fined him 6,000 yuan ($925) for fraud and “imparting criminal methods.” The four other students received sentences of 15 months to two years and fines of up to 4,000 yuan ($618).

By James Griffiths

Photo of the day

Subtle: A tourist poses next to a hammer and sickle monument in Nanniwan, around 60 kilometers (37 miles) from Yan’an, in northern China’s Shaanxi province. The onetime headquarters of the Communist Party, Yan’an has become a key pilgrimage destination for those seeking to celebrate the upcoming centenary of the CCP in July.

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