China’s Rapidly Shrinking Workforce Threatens Economic Growth

China’s birthrate has been declining due to its one-child policy, while population aging is gathering pace as life expectancy lengthens. The resulting drop in the proportion of the working-age population has acted as a constraint on economic growth. While low birthrates and population aging are phenomena common to developed countries, with Japan being a leading example, China has to face this severe challenge before it becomes affluent. Japan’s efforts to encourage childbirth, extend the retirement age and promote women’s employment, and to boost demand through the implementation of expansionary fiscal and monetary policies have failed to lift its economy out of stagnation. The major lesson for China from Japan’s lost decades is that raising productivity through structural reforms is the key to sustaining economic growth.