[Correspondent Column] The Variable of the Global Labor Market: 'Jungguk Population'

Decline in Affordable Labor Population Triggers Chinaflation

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The National Bureau of Statistics of China has announced the results of the 7th National Population Census. China conducts a nationwide population survey once every ten years. Prior to this statistical announcement, there was controversy over the population size of China. When foreign media predicted that China's population might fall below 1.4 billion, Chinese media countered by asserting it was above 1.4 billion.

Many people question why we should be concerned about another country's population. This is especially true in South Korea, which has the world's lowest birth rate. The retort is, "My (Korea's) own nose is running, so why should I worry about others (China)?" This is a valid point.

China's population differs from ours in terms of low-wage labor. Leading global companies have rushed to establish factories in China under the banner of "globalization." Producing goods in places with low labor costs creates cost competitiveness. Cost competitiveness is corporate competitiveness. It is not wrong to read "global" as "low-wage." China's population is thus a variable in the global labor market.

[Image source=Yonhap News]

China's labor force also affects global commodity prices. When China's labor costs rise, product prices increase. The rise in prices of Chinese-made goods impacts global inflation. This phenomenon is called "Chinaflation" (China + inflation). Inflation can be addressed through policy tools such as tapering (asset purchase reduction) or interest rates, but Chinaflation cannot be countered by financial measures. Replacing China will require a significant amount of time.

Some may argue, "With China's rapid economic growth and already high labor costs, global companies are relocating production bases elsewhere, so what nonsense is this?" This is also a valid point.

The claim that China can no longer serve as the "world's factory" due to a decline in its labor population has been raised for over a decade. Around 2010, China reached the "Lewisian turning point." The Lewisian turning point theory states that cheap rural labor flows into secondary industries, driving growth in developing countries, but after a certain point, a shortage of surplus labor (rural labor) occurs, leading to wage increases and eventually slowing growth. The Chinese leadership's announcement to maintain a 5-6% growth rate during the 14th Five-Year Plan (2021?2025) stems from this understanding. The leadership recognizes that the double-digit high growth achieved in the past is no longer possible. The "dual circulation" policy, a key economic strategy of the Chinese leadership, is also connected to the Lewisian turning point. It signifies transforming the world's factory into the "world's market" to sustain a sustainable economic structure.

More troubling for China than population decline is aging. The elderly population aged 65 and over, which was 106 million in 2009, surged to 160 million in 2019. In ten years, an elderly population of 54 million?more than the entire population of South Korea?has emerged. The population aged 60 and above reaches 254 million. Chinese sociologists predict that by 2050, the population aged 65 and over will approach 400 million. This far exceeds the threshold for a super-aged society (where the proportion of those aged 65 and over is 20% of the total population). The decline in the labor force is a fatal blow to China's Gross Domestic Product (GDP). Additionally, the increasing social costs of supporting the elderly will inevitably place fiscal pressure on China.

China's population cliff is a reality. Whether we like it or not, China and South Korea influence each other economically. Despite our own pressing issues, it is time to carefully observe how the variable of China's labor force will affect us.

This content was produced with the assistance of AI translation services.