“China’s economy will never overtake the United States!” This will make many people angry, and many people lost, when it reaches the “great nation”. However, this may well be the reality of the future. The predictions made by F.H. Yee based on population growth trends have been tried and true both nationally and locally.
Before President Joe Biden was sworn in, a key reference cited by former White House official Ryan Hass in his book The Future of U.S. Policy Toward China – Recommendations for the Biden Administration, edited by the Brookings Institution, was an article by Fuxian Yi, a demographer with a long history of macroeconomic research on China’s population.
Fuxian Yi is a senior scientist and author at the University of Wisconsin-Madison. His article, published in 2019 in the English-language South China Morning Post, is titled “Worse than Japan: How China’s looming demographic crisis will destroy its economic Dreams.
According to Yee, a major reason for the deterioration of U.S.-China relations is a strategic miscalculation caused by erroneous Chinese demographic data. In this regard, Voice of America interviewed Yi to share his insights on the cause and effect between China’s demographic truth and economic power and its relationship with the U.S. Below is the interview.
Reporter: You suggested that the U.S. has exaggerated the threat of China, why?
Yi: I have actually been studying Sino-US relations for more than 10 years, and this view on China’s “non-threat theory” has existed since the first edition of my book “The Empty Nest of the Great Powers” was published in Hong Kong in 2007. At that Time, the Chinese economy was growing at a long-term rate of 10 percent, and the overall thinking was that China’s economy would soon surpass that of the U.S. In 2011, the mainstream even believed that in 20 years, in 2032, China’s economy would be twice as large as that of the United States. There was a lot of domestic excitement at the time that China was rising to become number one in the world.
I thought that China was a Japanese-style sprinter, like Korea and Taiwan, while the US was a long-distance runner. It is not surprising that sprinting speed temporarily exceeds that of long-distance running, but it is impossible for sprinting to maintain high speed all the time. What’s more, China’s demographics are aging rapidly and its labor force began to decrease in 2013 and 14, while the U.S. labor force will not decrease until 2050.
The elite scholars in the US rarely analyze from China’s demographic data, much less have the real data because of the massive flooding phenomenon. In my more than 20 years of research, I have found that what was once the National Family Planning Commission, the National Bureau of Statistics, local Education departments, local household registration departments, and hospitals, all exaggerate the population numbers. In this way, the estimates of key economic components such as future labor force, consumption power, productivity, and innovation power were exaggerated, resulting in future economic growth and national power being exaggerated as well.
Reporter: Where do you get your bottom line when you say, “China’s economy will never surpass that of the U.S.”?
Yi: I remember when I went to China to attend the Boao Forum in 2016, I said in an interview with the New York Times that China’s economy would never surpass that of the U.S. I guess that was interpreted as me singing China’s praises, so I was blocked. At that time, Chinese public opinion was a “great, my country” cheer, and my voice was a big blow to China.
In the end, I always thought that the main body of the economy is the population, and only with the population can there be a series of economic activities such as production, consumption and innovation. China’s rise is dependent on the population. 79 years of reform and opening up, the median age of the population in 80 years is only 22 years old, the United States was then 30 years old, the Chinese economy as long as a little obedience to the law can achieve very good success, and the fact is that. It was a youthful China versus a middle-aged United States, and it was inevitable that the economic gap between the two countries would continue to narrow. However, China’s labor force began to decline around 2014, and the median age has surpassed that of the U.S. by 2018, and is now 42 years old compared to 38 years old. If China stabilizes its fertility rate of 1.2 (an average of 1.2 children per woman of childbearing age over her lifetime), by 2035, the median age in China will be 49 years old compared to 42 years old in the U.S. In 2050 China will be 56+ years old compared to 44 years old in the U.S. Here you can see who actually has the advantage in terms of sustainability in each of the US and China.
I think that in about 2030-35, China will be inferior to the U.S. in all aspects of demographic data, meaning that economic growth will start to be lower than the U.S. around 2035.
Reporter: A few days ago, the Center for Economics and Business Research (CEBR), a British think tank, said that China’s economy will surpass that of the U.S. by 2028, which was echoed by the media and some experts; in addition, there are predictions that China’s GDP per capita will reach 50% or even 70% of that of the U.S. in the future. What do you think?
Yi: I don’t think it’s possible. To achieve an overall economic volume to surpass the U.S. by 2028 would mean that China’s annual economic growth rate would have to exceed 7% in the next few years. In fact, at best, China may exceed 7% in 2021 due to a rebound in recovery after the Epidemic, and no other year can exceed that.
I said in the 2000s that 2012 would be an inflection point for China’s population and also for the economy, that is, economic growth would start to slow down. No one believed it at the time. Sure enough, in 2012, China’s economy started to fall back from 9.6% in 2011 and slid all the way to 6.1% in 2019. This is an area where the investment community only looks at one or two years of data; I would look at more than a decade.
As for their GDP per capita projections, I don’t agree with them either. China’s current GDP per capita is one-sixth that of the U.S. There is no chance it will climb to half that of the U.S. or even higher. Japan’s GDP per capita, which used to be 1.5 times that of the U.S. in 1995, has now dropped to 61% in 2020 and is likely to fall below 40% of the U.S. in the future. South Korea and Taiwan, where the gap with the U.S. used to narrow, have settled at 42% of U.S. GDP per capita after 2011 and are not moving; South Korea hovered around 2011 to about 50% of the U.S. The per capita income level in these places will probably continue to drop to less than 30% of the US. The EU was 76% of the U.S. in 2008 and is now at 53%; Germany, the leading European country, had a per capita of 94% of the U.S. in 2008, but that drops to 71% in 2020; Italy was 84% of the U.S. in 2008 and drops to 51% in 2019; and Portugal and Greece are all in the same problem. These are just a few examples.
Reporter: These countries or entities all fall into a similar model, that is, from catching up with the U.S. to losing horsepower and then distancing themselves from the U.S. Why is there such a minefield? Will China also fall into this model?
Yi: Aging is the biggest problem. Europe, Japan, and other countries around the world have only started to grow apart from the U.S. because of this problem. These countries once crossed the middle-income trap, but then fell back into it because they fell into the aging trap. I have always used the analogy that no doctor diagnoses a patient to die of old age, but rather that they die of various medical conditions, like heart, cancer, obesity, etc.; Germany and Japan were seen to have one cancer and one stroke, but in fact the root cause is still aging.
China’s fertility rate in 1991 has been lower than the United States, in 2000 than Japan, Germany, Greece, Portugal, Italy is still lower, the future of China’s aging problem is more serious than these countries. Therefore, it is impossible for GDP per capita to reach 50% of that of the United States.
Aging is a gray rhino for China; and the new crown epidemic is a black swan for the U.S., which will pass in one year. The gray rhinoceros is long and impossible to escape. Now that the U.S. has suffered a Black Swan, many pro-China factions are crying out for a superior Chinese system, but in fact it is only China gaining a temporary sprint advantage. An aging population, declining consumer power, a declining economy, declining innovation, a declining workforce and declining manufacturing are the general direction for China.
Reporter: What do you mean by China’s wrong population data?
Yi: That is, flooding. 2000, the census statistics showed that China’s fertility rate was only 1.2, with 14.08 million births, and the time had come to encourage fertility. However, a director of regulations at the Family Planning Commission said that it was impossible to be so low, so it was misrepresented; the Commission even announced that once family planning was relaxed, the number would rise to 2.1, which would lead to unlimited population expansion. After the 2010 census and the 2015 mini-census, the Family Planning Commission continued to inflate the fertility rate.
Before the opening of full second-childhood in 2016, the Family Planning Commission predicted that 47 million babies could be born each year after the second-childhood; in 2015 it claimed that it could reach 22 million, although it did not reach this predicted number, but, in reality, the 2016 birth rate was much lower than expected, at 1.24, meaning 12 million babies were born. At that time, as the 19th National Congress was to be held in 2017, which would determine the existence of the National Family Planning Commission, the Commission, in order to continue to exist, announced that the birth rate was in line with expectations, saying that 18.46 million would be born in 2018. In fact, in 2018, the real birth rate surfaced when the National health Planning Commission was abolished and restructured, and the government found that just 13.62 million babies were born that year, significantly less than the 18 million or so previously forecast.
At that time, the NBS data came from the Family Planning Commission, while the president of the China Population Association was the director of the Commission, and the deputy director of the NBS in charge of the census was generally the vice president of the China Population Association, all under the leadership of the National Family Planning Commission, and everyone set the data as needed.
In addition, the local education bureau also “expanded” the figures, because education funding by the central and local joint funding, the central government of the central region to pay 60%, the western region of the central government to pay 80%, more students can be reported to get more central funding. 2000 children born in 2006 started elementary school, at this time, the original statistics of births 14.08 million, became 17.29 million. By 2014, when these children entered junior high school, funding had already been awarded and there was no need to hide as much, and their number dropped back to 14.26 million. at age 15 in 2015, the number shrank further to 13.5 million.
The health care system is also watered down. before 2008 farmers paid for their own births, after that the government set up a partial insurance system and farmers had insurance and fees for their births, so hospitals and governing bodies fudged the numbers and fraudulently claimed funding. The health commission also does not know how many people were born, they can’t control the number of births in so many hospitals, and birth certificates are simply uncontrollable.
In 2010, there was no restriction on the number of births, so many people bought and sold birth certificates and had double or even multiple births, and the population was falsified. The Public Security Bureau’s household registration data is more fraudulent than the Bureau of Statistics, because there are about twenty kinds of benefits linked to the household registration, including preferential housing. One small police station in Zhengzhou falsely reported more than a thousand hukou in one year. For example, Zhang San has a hukou in Zhengzhou, and then use Li Si’s name to buy a hukou in Guangzhou, Zhang San and Li Si both pay social security, later you can receive two social security, simply can not be detected.
From 2000 to 2019, the National Bureau of Statistics believes China has increased by 130 million people, while the public security household registry shows an increase of 170 million. I project that the number of births in China was around 10 million in 2018, which has started to grow negatively, but the National Bureau of Statistics says it was 15.23 million, an increase of 5.3 million, while the household registration shows an increase of 9.24 million.
Reporter: What you are saying is that demographic factors determine China’s rise yesterday, its turnaround today and its course tomorrow, so what are your observations about the demographic situation in the U.S. in this game?
Yi: The U.S. fertility rate has been higher than that of major European powers such as Britain and France for more than 100 years, and has been the highest in the developed world for decades. After World War II, there was a baby boom in both Europe and the U.S., but the U.S. had a higher peak, which was extremely critical to the development of the U.S. in subsequent decades.
The U.S. fertility rate declined for a time starting in the 1960s, until it was only 1.74 in 1976, lower than Europe. If that trend had been followed, the U.S. would have been in recession by now. However, since then, the U.S. began to encourage fertility, especially after Reagan came to power and introduced a series of policies, so that the fertility rate rebounded to 2.0 in 1989, and remained at about 2.1 until 2007. In contrast, the European Union slipped from 2.06 in ’76 to 1.65 in 1989 to 1.51 in 2007. 2005 also saw Japan in Asia drop to 1.26. In this segment of the U.S., Europe and Japan, the U.S. is the highest.
However, the population, which is dominant in the U.S., has been declining in the last decade or so and is now down to 1.65. It is estimated that the U.S. will remain at 1.5 for some time to come and therefore also decline, which is something the U.S. needs to be wary of and guard against.
You mentioned the role of artificial intelligence, robots in wealth creation, I think robots can indeed engage in production, but they do not consume ah; consumption is the core force of economic growth. Reducing consumption reduces demand and reduces the possibility of further innovation. Moreover, artificial intelligence only enables innovation from 1 to N. Only human capital can innovate from 0 to 1.
When it comes to the U.S. and China, I believe that there are many problems between the U.S. and China, but the trigger for the deterioration – the trade deficit – stems from China’s one-child policy. The previous generation of the one-child generation had sufficient labor and produced a lot, while the one-child generation’s consumer buying volume shrank and there was a surplus of products that needed to be exported in large quantities, causing the U.S. to import more and export less, and lose its own manufacturing industry.
Reporter: If you look back at the past, how do you evaluate the various predictions you have made?
Yi: In the United States, I once predicted that Texas would rise and the Midwest Great Lakes region would decline, which is now becoming a reality.
I have been quoted in every issue of the Congressional and Executive Committee on China report and by the Congressional Economic and Security Review Commission on China. But I don’t know if they take it seriously (laughs).
On the Chinese side, I wrote an article after 2000 that pointed to the decline of northeastern China; I published many articles around 2005 that concluded that the center of China’s economy would shift from the east and north to the west and south, probably the largest shift since the Tang Dynasty in the seventh century. My main basis for this prediction is population. China’s fertility rate is high in the south and low in the north, and high in the west and low in the east. The Northeast is the lowest and the Southwest is the highest, meaning that the Northeast is in decline and the Southwest is on the rise. This seems to be true now, as both those that should rise and those that should fall have emerged.
Northeast China’s GDP was 13.7% of the country in 1980 and 5% in 2020. The center of China’s economy began to shift west to south around 2006.
Dr. Fu-Hsien Yi, demographer and senior scientist at the University of Wisconsin-Madison, USA.
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