CHINA DEMANDS IMMIGRANTS NOW
Falling population threatens economic miracle
“I’m not sure what to expect, but it could be the largest human migration since the forming of the modern United States,” says Rosemary Chen, a social historian at the University of Hong Kong. After experiencing economic growth averaging 8% for 40 years China is in trouble.
“In 2011, the replacement rate, the number of children a woman of child-bearing age could expect to have during her lifetime, dropped to just 1.4, far below that of 2.1 required for a stable population,” says Kim Weiwei, an economist at HSBC.
Over 25 years that has translated into a real decline in the working-age population.
“The reason we didn’t experience it immediately was that technological innovation and automation meant that China could keep growing,” says Henry Hewlett, a trader at China-America Bank.
The Chinese government has placed self-sufficiency at the cornerstone of international policy. Admitting that it may need immigrants to bolster its population was anathema.
However, by 2035 the declines were noticeable. The cost of caring for its elderly was becoming a tremendous burden and fewer workers mean less state revenue.
The answer is immigration. China has opened immigration promotion centers in Africa, Latin America and Indonesia.
“The US migration created a powerful and dynamic melting-pot, but the US was an open democracy at the time. China is not yet. Who knows what will happen when millions of foreigners arrive, with their own languages and cultures. Will we have a melting pot? Or will it be a cauldron?” asks Chen.
ANALYSIS >> SYNTHESIS: How this scenario came to be
2011: Census crisis, labor crisis
In 2011 the results of China’s most recent census reveal a growing crisis: too low a birthrate with annual population growth down to 0.57%. The average number of children per woman is now down to just 1.4, well below the 2.1 ‘replacement rate’ necessary for population stability.
Worse, is that the population over the age of 65 is now 13.3% of the population and growing fast while that under the age of 14 is declining as rapidly, down to 17% from 23% since 2000. This demographic shift is rapidly leading to a similar situation as aging Europe, with a vast pool of retirees depending on ever-fewer workers.
More worryingly, the vast and seemingly unending supply of abundant labor is drying up. China’s factories are struggling to find workers and wages are rising rapidly in response. Two years ago entry-level factory wages were 80 US cents per hour. In the fourth quarter of 2010 they were 95 cents and by Q4 2011 they are US$ 1.17, up 46% in two years. Signing bonuses are becoming normal.
The situation is worse in China’s coastal cities. Wenzhou alone has an official shortage of one million workers.
These rising wages are already having an impact on China’s exports and causing inflationary pressure elsewhere in the world.
2015: China looks offshore
Demand is picking up as the global economy starts to recover. The pressure on China’s workshops results in two immediate government responses.
“The Chinese government is promoting automation and industrialization at home while buying low-cost manufacturing hubs in East Asia and Africa,” says Nigel Evans, an analyst at HSBC in Hong Kong. This translates to a US$ 2 trillion investment in low-cost loans to factories across China to finance purchase of new automated systems, as well as a further US$ 1 trillion in factories in Indonesia, Kenya and Nigeria.
“We are very excited to work with our Chinese brothers and have identified a lovely area of land just outside Abuja for their new industrial city,” says Adego Bababuya, a Nigerian Ministry of Finance spokesman.
“It’s a phenomenal amount of cash,” says Sarah Tomkins, an independent risk analyst in London. “These are countries with limited access to the courts or rule of law, and creating local industrial investment leaves China exposed to the same sort of risk that Westerners have experienced in China.”
“This is the opportunity I’ve been pushing for five years. Now we can create 85 million new jobs,” says a plainly excited Justin Yifu Lin, Chief Economist and Senior Vice President at the World Bank.
2025: China’s Silver Hordes
China’s 65+ population hits 200 million, now 23% of the population. The population of 20 to 24 year-olds has plunged to only 60 million. Investors start betting that China cannot afford to look after all these pensioners. State health-care, already under pressure, starts to crumple as hospitals experience a wave of doctor retirements.
Automation and industrialization is now widespread and China’s economy is still running a very small surplus but only by under-investing in state services. China’s experiment with industrial investment in Asia and Africa hasn’t gone as well.
“Corruption put paid to China’s investment in Nigeria almost immediately. The money was spent but all China got was a swamp,” says Sarah Tomkins. “The investment in Indonesia could have gone better, but it was on land that was washed away in the 2017 Asian Tsunami.”
The workers in these countries are angry that the jobs they were promised never materialized but China appears to have retreated from its international investments.
“We have recommended to the Chinese government that they consider opening their borders to immigrants from Asia and Africa. This anti-immigrant policy is not going to serve them,” says Yogo Ma, at the UN Population Migration unit.
2036: Bring us the immigrants
“It lacks a certain class,” says Miles Travis, an immigration lawyer in Dubai. “At least the Americans spoke about the ‘huddled masses yearning to breathe free’. All the Chinese want are cheap workers.”
Travis is in Dubai to take advantage of the open-wall policy launched by China in August. Anyone can apply for a five-year renewable work permit to go to China. Income taxes will be fixed at 5% and China has an initial target for 2036 of 10 million workers. They are not offering a path to citizenship just yet, but they are offering free transport for those who make their way to transit points in Dubai, Johannesburg, Abuja, Hanoi, Sao Paulo, Jakarta and Lima.
“I’m not sure what to expect, but it could be the largest human migration since the forming of the modern United States,” says Rosemary Chen, a social historian at the University of Hong Kong. “The US migration created a powerful and dynamic melting-pot, but the US was an open democracy at the time. China is not yet. Who knows what will happen when millions of foreigners arrive, each with their own language and culture. Will we have a melting pot? Or will it be a cauldron?”
Links to related stories
- The most surprising demographic crisis - The Economist, 5 May 2011
- Defying Global Slump, China Has Labor Shortage - Keith Bradsher, New York Times, 26 February 2010
- China’s Aging Workforce Population At A Turning Point - Eurasia Review, 1 July 2011
- How to Seize the 85 million Jobs Bonanza - Justin Yifu Lin, World Bank, 27 July 2011
- China’s Unthinkable Population Problem - Austin Brown, The Long Now Foundation, 22 July 2011
Warning: Hazardous thinking at work
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