What fast-ageing countries such as China tell us about our economic future
More than 80% of global GDP is generated by countries with rapidly ageing populations. How these seniors directly and indirectly shape their economies - especially in a political sense - will henceforth be an important factor when trying to understand global and domestic political economy trends.
North-east Asia is already head of that curve. Japan has the oldest population among the world’s high-income countries, while China - a developing country - is home to the world’s largest number of elderly citizens and its population is ageing increasingly rapidly.
Comparing these countries - both of which tend away from immigration - can help to shed light on the related economic challenges. That, in turn, may help other countries to avoid some of the potential pitfalls in this period of rapid population ageing across countries generating the majority of world GDP.
Rich old Japan
In June this year, Japan hosted the first-ever G20 summit to include a priority focus on demographics. Famous for its super-ageing population, Japan is second only to Hong Kong SAR in having an extremely low population share of children aged 0-14 years. An era not just of an ageing population but of population decline, and the alarming policy challenges that will result, lies ahead.
The former governor of the Bank of Japan, Masaaki Shirakawa, wrote recently about the fact that Japanese officials had long misdiagnosed the country’s persistent deflation as having primarily economic rather than demographic drivers. Since the delay in identifying that driver had aggravated the ensuing policy challenges, he urged other countries to learn from Japan’s mistake.
Recently published research by BNP Paribas, meanwhile, suggests that the ageing of the global population has shaved some 2.6% from the neutral rate of interest since 1990, with intensifying population ageing set to continue the trend.