Population aging in China (A1 stable) and other emerging markets in Asia will hurt economic growth, competitiveness and fiscal revenue, unless productivity gains accelerate, according to a new report by Moody’s Investors Service.

And although China’s new policy allowing couples to have up to three children could support fertility, it is unlikely to dramatically change the national birthrate, meaning that aging will remain a credit-negative constraint.

  • Shrinking workforces could dampen rapid GDP growth and hurt fiscal revenue in China, Thailand and other economies
  • In China’s case, productivity gains may lessen the credit-negative impact of demographic changes

Thailand’s (Baa1 stable) total dependency ratio is set to jump nine percentage points to 51% by 2030 – a faster increase than China’s – which will pressure public and private savings through higher taxes and social spending, reducing innovation and productivity gains.

In China, by contrast, Moody’s expects that innovation in artificial intelligence, logistics and biotech could help to increase productivity, mitigating the economic drag from aging.

“The historically fast GDP growth of many of Asia’s emerging economies in recent years has reflected rapid gains in labor supply and investment. But as workforces shrink over the next decade, it will become more difficult for these economies to sustain their previous rates of expansion,”

Martin Petch, a Moody’s Vice President and Senior Credit Officer.

“Additionally, contending with an aging population at a relatively early stage in their economic development will increase the challenge for emerging market governments in addressing this issue,” adds Petch.

The experiences of some of Asia’s advanced economies in tackling demographic challenges illustrate the ability of policy to mitigate related credit pressures – as well as its limitations. In Japan (A1 stable), for example, pension reforms and the expansion of child and nursing care, among other measures, have led to increased senior and female workforce participation. However, the fertility rate continues to fall.

Subscribers can access the report “Sovereigns – Asia Pacific: China’s new childbirth policies highlight demographic risks in emerging Asia” at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1281250

About the author

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Sign Up for Our Newsletter

Get notified of our weekly selection of news

You May Also Like

SEC tightens regulations on digital assets to enhance investor protection

In case of a withdrawal or transfer of fiat money at an amount from 2 million baht to not exceeding 50 million baht, digital asset business operators shall seek approval from two authorized persons.

How fintechs are revolutionising remittances in emerging markets

Remittance flows tend to be more stable than broader capital flows. They also tend to be countercyclical, increasing during downturns or catastrophes, when other capital flows generally dwindle.

Vietnam, China and Thailand are Cambodia’s top three export destinations

Cambodia’s total export to the Regional Comprehensive Economic Partnership (RCEP) member countries amounted to $1.95 billion in the first quarter of 2022, up 11 percent from $1.75 billion  over the same period last year, a Ministry of Commerce’s data showed on Thursday.