Commentary Magazine


Time to Short China?

In China in Revolt in the December COMMENTARY, Gordon Chang took note of the turbulent nature of Chinese society. Three decades of reform have transformed a regimented totalitarian society into a dynamic hybrid: free and unfree, assertive and repressed, at once.

As these antimonies suggest, China is not a society in a stable equilibrium. What is more, its social, political, and economic system is under sustained pressure from many directions. One of the least noted but most significant sources of future trouble is the changing composition of the Chinese population.

As of this month, China is estimated by the CIA to be inhabited by 1,321,851,888 people. The CIA’s precision here can certainly be questioned—indeed, it is preposterous—but what is not at all in doubt is that these 1,321,851,888 people, like the rest of us, are getting older every day. But unlike the rest of us—or at least those of us here in the United States—they are not being replenished.

Thanks in large measure to China’s one-child policy, the Chinese population growth rate has fallen to a low of .606 percent annually. (The U.S. rate, by contrast, is .95 percent). While the total Chinese population will continue to expand, in about fifteen years, unless some unforeseen factor intervenes, it will begin to contract. And as it contracts, it will also begin to age. In fact, according to the CIA, China will come to have ”one of the most rapidly aging populations in the world.”

What are the implications of that? Testifying before the House Armed Services Committee on July 11, Thomas Fingar of the Office of the Director of National Intelligence, notes that with “a couple of generations of one-child families, no social-security safety net, a shrinking pool to support an ever-larger group without the normal family—[the] one-child family [policy] means there aren’t aunts and uncles and cousins and others that will be part of the support system.” All this will serve to inject “at least the potential for fragility to the social system.”

That may well be an understatement. Writing in Policy Review, the demographer Nicholas Eberstadt calls the problem a “triple bind”:

Without a broad-coverage national pension system, and with only limited filial resources to fall back on, paid work will of necessity loom large as an option for economic security for many older Chinese. But employment in China, today and tomorrow, will be more physically punishing than in OECD countries, and China’s older cohorts are simply less likely to be up to the task. The aggregation of hundreds of millions of individual experiences with this triple bind over the coming generation will be a set of economic, social, and political constraints on Chinese development—and power augmentation—that have not as yet been fully appreciated in Beijing, much less overseas.

Is this good news for the rest of the world, or bad? The composite index of the Shanghai stock exchange was up 130 percent last year and is rising still. One question is: should one sell Chinese stocks short now, or wait until the population implosion begins in about fifteen years?