Surprises from China’s Latest Census
By Scott Kennedy and Mingda Qiu
China’s latest census has garnered a great deal of attention because it shows that the total size of the population is stagnating. That is certainly important and confirms that we have shifted from an era when officials were aiming to limit births to one where they are trying to encourage them, at least among the Han majority.
We still need to get a hold of the entire dataset, but there are a few other nuggets in the initial release from the National Bureau of Statistics (NBS) that stood out to us which have implications for China’s economic trajectory and relationship with the rest of the world.
1. The idea of a “floating population” (流动人口) no longer makes any sense. The census reports that the number of people not living in their official residence for which they have a residency permit is 492.76 million, that registers an 88.5% increase in the past decade. That is more than one-third of the total population. This includes 116.94 million people who still live in the same city, another 250.98 million who have moved out of their home city but still live in the same province, and 124.84 million who reside outside their home province altogether. What this means is that moving for work and re-locating one’s residence is now a normal feature of life for the average Chinese. The idea that the vast majority of people live their entire lives near where they were born and that moving elsewhere is primarily an act of desperation by migrant laborers is just fiction. China has started to reform the household registration (hukou) system that embeds these ideas, major municipalities such as Shanghai and Shenzhen have made inbound relocation easier and less bureaucratic, but a much better approach would be a 5-10 year process to completely eliminate the system altogether.
2. China is a highly urban country centered around industry and services. The census reports an urban population of 901.99 million people, or 63.9% of the population, up from 49.7% in 2010. This means China has long since passed the time when it was primarily a rural society. But these figures don’t do justice to the transformation. The initial census release did not include employment figures, but the most recently available annual figures, from 2019, show that 25.1% of Chinese work in primary industry (agriculture, fisheries, mining), while 27.5% in industry and 47.4% in services. Far more Chinese work in factories, deliver packages, design video game apps, and invest in securities than work bent over in fields. The numbers are even more lopsided when viewed in terms of China’s gross domestic product (GDP), with primary industry accounting for only 7.7%, whereas industry contributed 37.8% and services well over half, at 54.5%. The other side of the coin is China’s changing external profile, with growing imports of energy, raw materials, and food, as well as components (such as semiconductors) that go into final goods they consume domestically or then assemble into products for re-export.
3. China is aging, but it’s still possible for China to be old and rich. Bert Hofman, former chief representative for the World Bank in China and now the director of the East Asian Institute at the National University of Singapore, persuasively argues in a recent newsletter (and in interviews) that labor is now only a tiny contributor to China’s GDP growth, with much more coming from investment and improvements in total factor productivity (TFP). It’s far less important that China’s population is shrinking than it finds a way to more efficiently allocate capital and raise the productivity of the workers that it does have. And the latter will come primarily through raising the proportion of people who finish both high school and college. Despite the expansion of universities, only 15.5% of Chinese have obtained an undergraduate degree (see Figure 1). Moreover, by raising its retirement age (now at 55 for women and 60 for men) and making greater use of artificial intelligence and other technology, China’s older workers can more productively contribute to the economy.
Figure 1: Educational Attainment Levels in China (1990 – 2020)
4. Inequality is the economy’s Achilles’ heel. More census data still needs to be published, but the initial picture, along with previously available data, shows a widening gap in regional prospects. The Northeast rustbelt population is shrinking and getting older, while coastal provinces are experiencing population growth and getting younger. Northeastern Liaoning’s population of 42.59 million is dwarfed by Guangdong’s 126.01 million. Age-wise, 25.7% of Liaoning’s residents are 60 or older, seven percentage points higher than the national average. By contrast, only 12.4% of Guangdong residents are 60 or older. In 2020, the average annual income for someone from northeastern Liaoning is RMB 32,738, whereas in Guangdong the comparative figure is RMB 41,029. Andrew Batson, the China director at the Beijing-based economic research firm Gavekal Dragonomics, has noted that to avoid losing population, local authorities in the Northeast need to make the region more friendly to economic development, but that the outmigration makes it harder because the youths who would create positive change are leaving. The urban-rural divide is even more stark. In their book, Invisible China, Scott Rozelle and Natalie Hell make a persuasive case that no country with the level of inequality China faces has ever successfully escaped the middle-income trap. Rather than coastal China and high-tech industries pulling the rest of the country forward into superpower status, it is just as possible that entrenched hardship for substantial segments of both urban and rural China could hold the country back from achieving its full potential.
Scott Kennedy is Senior Adviser and Trustee Chair in Chinese Business & Economics at CSIS. Mingda Qiu is a consultant with the Trustee Chair in Chinese Business & Economics at CSIS.
This blogpost is made possible by general support to CSIS.
Related Trustee Chair Activity
Event: “Invisible China: How the Urban-Rural Divide Threatens China’s Rise: A Book Talk,” October 14, 2020.