I was planning to go back this week to some important topics related to individual and organisational resilience, but I couldn't resist commenting on last week's news about China.
Chinese stocks tumbled last Wednesday following the data release about a record low birth rate in 2023 as its population shrank for the second year in a row. The trend marked the deepening of a demographic challenge set to have significant implications on the world’s second largest economy (CNN, Wed January 17, 2024). Similar messages, often with a catastrophic tone, were echoed by media worldwide, prompting a strong and negative reaction in the stock market.
Is this truly a surprise? Are expectations for growth in every aspect of life reasonable?
If you look diligently at important statistics, it is not really a news or something unexpected. I think that very robust explanation to the world demographic was proposed by Hans Rosling et al. in his book Factfullness.
In 1800 the average life expectancy of a human was 30 years, mainly driven by child mortality, which was at the level of 50% for children below 5 years of age. Most of those who survived were leaving not that much shorter than people today.
Average number of children per woman was around 6 at that time, yet the population was not growing due to very high child mortality rate. Average number of kids who were making it to become parent was around 2, which is a basic generational replacement rate.
It was a steep increase in the survival rate of kids that brought about a population boom. This improvement resulted from higher incomes, leading to advancements in health and nutrition. Suddenly from an average of 6 kids only a small fraction failed to survive more than 5 years. After a period of adjustment, number of kids per family decreased to 2 or even fewer.
China's fertility rate fell below 2 children per woman as early as 1993, so the current demographic situation is not news. It follows the pattern of other countries that have reached a certain level of wealth (Rosling defines this at relatively low level – 16 USD per person daily).
The second note is related to growth expectations. Is there any good reason to expect China to grow population apart from a paradigm of growth as the only driver of development?
If the country / organization or you overinvests due to expectations of growth, it becomes a real problem. However, if your investments are balanced and phased in line with a more resilient and sustainable development pattern, it is perfectly acceptable.
An aging population requires a very different operating model, a shift in thinking away from growth towards principles of a sustainable economy. This means operating within a space where resources are limited, and these limits must be respected in economic models. According to Rosling argumentation sooner or later this issue will come to every country in the world.
Resources
Rosling H., Rosling O., Rosling Rönnlund A. - Factfulness: Ten Reasons We're Wrong About The World - And Why Things Are Better Than You Think. Sceptre, 2018.
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