China’s labour force is shrinking and the “migrant miracle” that powered its industrial rise is mostly exhausted, removing the key drivers of the country’s meteoric growth, according to leading economists.
The transformation will lead to slower growth, reduced investment and a loss of competitiveness, increasing the urgency of reforms to fuel new sources of expansion, they warn.
Today the Financial Times begins a series on the end of the miracle — the three decades of rapid growth fuelled by unprecedented migration of labour from the unproductive farm sector to work in factories and construction.
Consensus has emerged that China has reached the point at which the once-inexhaustible pool of surplus rural labour dries up and wages rise rapidly.
“Now we are at the so-called Lewis inflection point,” said Ha Jiming, chief investment strategist for private wealth management at Goldman Sachs in Hong Kong. “The working-age share of China’s population peaks this year at 72 per cent, then it will start to fall even more rapidly than what we saw in Japan in the 1990s.”
Cai Fang, director of the Institute of Population and Labour Economics, estimates China’s potential gross domestic product growth will fall to 6.1 per cent from 2016-20.
Since Deng Xiaoping launched market reforms in 1978, 278m migrant workers from rural villages have moved to the cities. But the process is now mostly complete. Mr Cai said: “From 2005 to 2010, the growth rate of migrant workers was 4 per cent. Last year it was only 1.3 per cent. Maybe this year it will contract.”