Question by Tee: Aging population: good or bad for the economy?
Like we all know, the Chinese population is aging very fast (because obviously, the Chinese can only have 1 Children per couple?). Is this good or bad for the economy. We have all these people age people who dont work but still have to eat, and use resources; most of them would have retirement savings etc. So, i would think it would be good for the economy. But at the same time is bad for the economy because when the population shrinks, the economy shrinks as well. What do you think?
Best answer:
Answer by Paul E
well it depends on the economy your talking about? when it comes to the Chinese, most of them probably have little retirement savings, but as far as i know they dont have pensions either.
Countries like the US and Australia. are concerning to me, as Australia i know has 4 Million Baby Boomers retiring. and i think America has something like 100 Million. (i think) . most dont have enough 401K / Superannuation. so to provide all those people with pension the US would have to come up with 1 Trillion each month and Aus has to come up with 4 Billion. both of these amounts is money that the governments cant afford to provide. So i can only see the Pension system collapsing under the weight of expense.
the other thing is the 401K and super, these are invested in the stock market. which relies on a balance of buying and selling to remain level. now when a retiree withdraws benefits the company sells stock to pay for the withdrawal. now what do you think might happen when 100 Million + people withdraw benefits. sounds like a lot of selling on the market. this may cause a major crash of the markets world wide.
Thats what i would be worried about
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Tags: Aging, Economy, good, Population
2 responses to Q&A: Aging population: good or bad for the economy?
US doesn’t have 100m baby boomers about to retire
It’s a bad thing for the economy, especially the UK where healthcare is paid for by taxes, the increase in elderly all living longer means the healthcare costs and taxes spiral.
China has been a booming market over the past 10+ years. 10 years ago you would seem mostly bicycles in the streets, now those same streets are congested by cars.
China surpasses USA in world’s biggest auto market
http://news.smh.com.au/breaking-news-world/china-auto-sales-now-worlds-biggest-state-media-20100111-m2v6.html
China Is Becoming the World’s Manufacturing Powerhouse (2001, WorldBank.org)
http://www.worldbank.org/html/prddr/trans/octnovdec02/pgs4-6.htm
China, as a nation has no debt. Zero. They have cash – a lot of cash:
“China’s reserves are more than – $ 2 trillion, the world’s largest.”
http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html
80% of all toys come from China.
http://www.usatoday.com/money/industries/retail/2007-10-04-toy-fear_N.htm
China is the largest holder of US debt
http://voices.washingtonpost.com/economy-watch/2009/09/looming_trade_war_with_china_o.html
China Holds $ 800B in U.S. Debt and Collects $ 50B a Year in Interest
http://www.cbsnews.com/stories/2009/11/15/eveningnews/main5660868.shtml
The above CBS article is not accurate as it omits the fact that Hong Kong (HK) is controlled by China; and as of 10-09-09, HK holds $ 142 Billion of US debt, making China-HK holding $ 940.9 Billion of US debt, not just $ 800 billion as reported.
source: US Treasury (Oct-2009)
http://www.treas.gov/tic/mfh.txt
China surpassed the USA in manufactured goods since 2006
http://www.industryweek.com/articles/china_poised_to_pass_u-s-_in_manufactured_goods_exports_11701.aspx
“China will become the world’s largest economy in 2032, and grow to be 20 percent larger than the United States by 2050. Over the next forty years, nearly 60 percent of G20 economic growth will come from Brazil, China, India, Russia, and Mexico alone.”
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=24195
China has a booming middle class.
http://news.bbc.co.uk/2/hi/asia-pacific/3732914.stm
http://www.csmonitor.com/2007/0102/p01s02-woap.html
China has a HUGE work force, far more than the USA, and does Not have an aging -problems of retiring people (through at least 2050)
http://www.china-profile.com/data/ani_pop_1.htm
And even when they do, they do not have socialism, no social security, pensions, that will bust their country.
The one child per family is a general rule, but Chinese can have more than one child. They have to pay for them: Like a fee to the government and they must be approved by government. This is very in depth here. China has contemplated the one child per family rule, and I bet this will change for good one day.
I don’t see China’s future population aging problem as a major economic risk to China as compared to the US’s baby boomers.
If China stays on track with their exports, the U.S. government through its massive trade deficits, and massive issuance of trillions of debt, will be financing all of China’s economic needs for the next several hundred+ years.
Ten Trillion and Counting (US Debt Projections)
(Remember: China is the biggest buyer of US debt.)
http://www.pbs.org/wgbh/pages/frontline/tentrillion/view/
Bottom line China: It has all been good.
Current concern of China is the booming “economic bubble.” (This is likely a short term situation, not like the US’s long term debt problem).
http://www.telegraph.co.uk/finance/china-business/6976229/China-heightens-bubble-fears-as-it-tightens-monetary-policy.html
In contrast, in the USA, the Baby Boomers have long been calculated to bust Social Security System.
Baby Boomers Expected to Bust Social Security (2007)
http://www.associatedcontent.com/article/417004/baby_boomers_expected_to_bust_social.html
Baby Boomers or Bust – the Death of Social Security (2008)
http://www.associatedcontent.com/article/1053151/baby_boomers_or_bust_the_death_of_social.htm
Solution:
Higher income taxes for everyone else, increase retirement age, plus lower SS benefits.
Why Baby Boomers May Bust the Housing Market (2008)
http://blogs.wsj.com/developments/2008/01/16/why-baby-boomers-may-bust-the-housing-market/
Retiring Baby Boomers Will Not Cause an Asset Bust (2009)
http://www.heritage.org/research/economy/wm2613.cfm
Populations don’t really shrink. And an economy’s success is not determined by population, rather than by efficient productivity, cost controls, and competitiveness. This is why cheap labor from China and India are winning, and expensive labor and mass regulation in the USA is losing.
Complicate an economic system by socializing a free market and you no longer have a competitive free market, but a controlled market. Further complicate that by burdening those costs on existing labor and you have a decrease in lifestyle and earnings. This is what the U.S. is currently doing.
As soon as people get out of their political hole and start taking a look at simple economics and start asking — what is the long term impact and true costs of this policy or that policy; only then one will have a sense of reality to answer, is this the kind of economic system I want to pay for?
Excerpts of the above article taken from:
“Made in China. On Loan to the USA”
written by Net Advisor™
(c) 2010 All Rights Reserved.
Full article:
http://profiles.yahoo.com/blog/CUXTCCBSBYDZODXWGYK2IZDOOI?eid=h1FkzqAzmnqyza3OgaQ4M8s6gmHtp4POrjN5kIXbpD17YQNTYQ
Q&A: Aging population: good or bad for the economy?