The economic effect of China's one-child policy

China's one-child policy has created a lopsided demographic in the country, making it look a lot like rich Western nations. And for China, a country that doesn't have the same buffer of wealth that industrialized nations do, this is not a good thing.

China's annual growth rate has been in the double digits in the past decade. Two Citigroup economists, Nathan Sheets and Robert A. Sockin, predict that China's shrinking work force—and it's growing senior population—is likely to trim 3.25 percentage points off the country's annual growth rate between 2012 and 2030, reported WSJ's Real Time China Report blog.

The country's one-child policy initially provided an economic boost. China's working age population rose in the past 20 years, pushing up incomes and productivity as young people headed into cities to work in factories.

From Sheets and Sockin:

"The share of the young was diminished and being a developed country, the number of people over 65 years old was low as well."

The share of the working-age population is expected to decline in China between 2010 and 2030 almost as fast as in Japan, the U.S. and other developed, rich nations. Sheets and Sockin estimate that China's annual growth won't exceed 6.9 percent over the next two decades.

Changing the one-child policy won't fix the problem. It could make it worse because more births would mean working parents have more dependents, the WSJ noted.

Sheets and Sockin wrote that using more automation in factories and requiring people to work longer hours would help maintain the country's annual growth.

Photo: Flickr user timequijano

This post was originally published on Smartplanet.com