Human-resource development and demographic change in China

National Transfer Accounts Project
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Honolulu, HI: National Transfer Accounts, East-West Center
China’s economic success in recent decades can be traced in large part to the mobilization of the country’s enormous human-resource base. Improvements in the health and education of China’s huge working-age population have made a strong contribution to economic growth. Looking ahead, as today’s large cohorts of workers grow older and transit into retirement, much smaller cohorts of children—born in an era of very low fertility—will be growing up and joining the workforce. Given a smaller number of workers, human-resource development that maximizes the potential of each individual will be even more central to China’s efforts to achieve broad social and economic development goals. At this point, China is poised to address many of its human-resource challenges successfully. Public spending on education, and to a lesser extent on healthcare, appears to be commensurate with the current level of development. There is one important exception to this generalization, however—the disparity in spending on higher education. Although university enrollment tripled in the 10 years between 2000 and 2010, rural and lower-income young people still face clear disadvantages. Improving economic security for the elderly is another challenge. Under China’s current, highly fragmented public pension scheme, pension programs for urban and formally employed citizens are relatively well established and generous, but rural residents and those employed in the informal sector do not have adequate access to public pension programs and, thus, remain highly vulnerable in their old age. Extending public pension programs to these groups will be challenging in the face of a slowly growing workforce and a swelling elderly population. One policy change that would help address this challenge would be to raise the retirement age. As its population ages, China should be prepared to make better use of the productive potential of older people. Overall, successful human-capital investment is essential for achieving sustainable economic growth and improving the wellbeing of all age groups.
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