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China Economics Observer - The Next 10 Years: Demographics

Trend reversals to reduce growth and reshape the economy

Morningstar has published its latest China Economics Observer, “The Next 10 Years: Demographics - Trend reversals to reduce growth and reshape the economy.” The research report is the first in a four-part series about China’s 10-year economic outlook and includes an overview of the long-term demographic trends that will shape the world's second-largest economy and impact investors globally. The report examines the influence of fertility, age, and urbanization as key drivers of change.

Highlights of the Observer include:

  • Despite looser family planning laws, Morningstar equity analysts expect births to drop 30 percent by 2026 as the population of women in their 20s falls by more than one third. Companies that sell infant formula and diapers will find the next 10 years to be demographically challenging.
  • China's population will age at a nearly unprecedented pace, with the senior population growing by 50 percent, totaling 207 million by 2026, compared to 138 million in 2016. Healthcare companies that can get a toe-hold today are aligned with a once-in-a-generation demographic tailwind.
  • China's working-age population will contract by 23 million over the next 10 years, marking a significant reversal from breakneck growth of the past several decades and shifting the balance of power from employers to workers.
  • China’s support ratio—the number of working-age adults for every child and senior—will fall from 2.7 to 2.3 by 2026. A collapsing support ratio will reduce China's extremely high household savings rate, catalyzing consumption growth, but draining the pool of funding that has supported the past few decades' feverish pace of construction.
  • Morningstar expects the country's urban population to grow by about 100 million over the next 10 years, considerably less than the 209 million expansion of the past 10 years. 
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