Cai Yi, a member of the Monetary Policy Committee of the People’s Bank of China, said that the population of the Communist Party of China would peak in just four years, and then consumer demand will decline significantly.

Cai Yi, an expert on population issues, has just been appointed as a Monetary Policy Committee of the Central Bank. Recently, he published a working paper calling for “comprehensive liberalization of fertility and stop hesitation to wait and see the existing policy effect,” which triggered a heated discussion among the public.

“When the population volume enters negative growth (after 2025), there is a demand-side shortage.” Hong Kong’s South China Morning Post quoted Cai Yi as saying on Sunday.

Cai Wei pointed out at the “Financial Risk Prevention and Control Summit Forum” on Friday that “the current national aging and childlessness appear at the same time, which further accelerates the aging process of China (Communist) countries. Our country may peak its population in 2025 and face an important turning point in the demographic structure again. We need to focus on the impact of demographics on future consumption.”

Cai Yi’s comments coincide with the latest census results of the Communist Party of China later this month.

According to a recent research report released by the central bank, the Communist Party of China should immediately liberalize its fertility policy. Otherwise, it will face a situation that the proportion of workers is lower and the burden of pensions is higher than that of the United States by 2050.

In a rare frank evaluation, four central bank researchers said that the state should not interfere with people’s fertility. Otherwise, it would be too late to reverse the economic impact of the population decline.

Since 2016, CCP couples can have two children. “We should not hesitate and wait for the effect of existing fertility policies.” In a working paper published earlier this week, the researchers said, “When some residents still want to have children but can’t, it is time to let go of childbirth. When no one wants to have a baby, it is useless to let go.

After more than 30 years of the controversial one-child policy, the Communist Party of China faces a demographic crisis. According to official data, the population over 60 years old is rapidly, and according to official data, the Communist Party of China will increase to 400 million in a few years. Population aging will mean problems such as lack of labor force and insufficient demand side.

The two-child policy, which began in 2016, did not substantially impact the national low fertility rate, and the number of newborns nationwide decreased by 2 million in 2018.

According to official data, the overall number of new births in the Communist Party of China decreased by 580,000 compared with 2018, which is the third consecutive year since implementing the universal two-child policy in the mainland. According to the  National Bureau of Statistics, China’s population was 1.34 billion in 2010, with an annual growth rate of 0.57%, down from 1.07% a decade ago.

Cai Yi said that the number of working age in  China is declining since 2010, which mainly affects the supply side of the economy. It is worth mentioning that since the significant demographic transition in 2010, the working-age population of the Communist Party of China has peaked year by year. This transformation mainly has an impact on the “supply-side” of the whole country. The “demographic dividend” of the Communist Party of China has disappeared. The comparative advantage of the manufacturing industry has declined, and exports have decreased, which has had a specific impact on the speed of economic growth.

Suppose working-age people struggle to support their families while facing the additional financial burden of caring for elderly relatives. It will make them more inclined to save than spend and is bad news for the economy because the government has been seeking to promote economic growth through domestic consumption in recent years.

“The cost of childbirth, parenting, and education is the biggest constraint for young couples.” Therefore, encouraging childbirth is the first response and can no longer miss the opportunity.

“For older people, we need to increase their labor participation and social security benefits so that they can contribute and share in economic growth while maintaining consumer demand.” Cai Yi said.

He said that the government should stimulate consumption by low-income groups because they are more inclined to consume than the rich.

So, is the disappearance of the so-called “demographic dividend” a good thing or a bad thing? A large population base and a young and robust labor force mean sufficient productivity and high productivity for totalitarian countries. More labor than jobs, causing work to compete with each other, employers can take the opportunity to lower wages and form a “buyer market.”

Self-employed workers hope for higher pay, less competitive pressure, and more relaxed leisure time. Only with high gain can we drive domestic demand consumption, and less competitive pressure can make society more stable. Loose leisure time is conducive to personal physical and mental health. All these needs of individuals are contrary to the view of “demographic dividend.”

Professor Robert C. Allen of Oxford University in England, in his book Global Economic History – Oxford General Reading Book, once proposed that the “high-wage economic model” is contrary to the “demographic dividend.” He said, “How many economists are lamenting the disappearance of China’s ‘demographic dividend?’ 

 On the other hand, only the disappearance of the ‘demographic dividend’ can promote wage levels. 

The improvement of wage levels can promote the full realization of automation in the production process and improve the level of industrial structure.”

Himlaya Moscow Katyusha (RU)ladin