Liang Jianzhang: whats wrong with Li Ties theory of Chinas overpopulation?

 Liang Jianzhang: whats wrong with Li Ties theory of Chinas overpopulation?

Liang Jianzhang

Li Tie said that because the employment problem of these (rural) people has not been solved, China will have a long-term surplus population. The implication is that if the population is small, the employment of these people will be solved. In fact, this kind of thinking of linking employment and population is a mistake that non professionals often make. Population is not only a labor force, but also a consumer. It will create demand and employment opportunities, which is the common sense of economics. According to Li Ties logic, will there be unemployment in Russia with a large population? As for South Korea, where the population density is much higher than that of China, will unemployment be widespread? If we study the economic theory of population and unemployment and read the data of various countries, it is not difficult to come to the conclusion that population and employment rate are basically irrelevant.

Chinas labor force will face a surplus, because it will have technological substitution, which is the view that non professionals are very prone to make mistakes because of taking for granted. Mainstream economists hold the view that technological progress will replace some jobs, but create a lot of jobs. A hundred years ago, most people were still engaged in agriculture. Later, most people were engaged in manufacturing. Now, most people are engaged in service industry. In the future, more people will be engaged in innovation, culture, entertainment, medical and nursing industries. The more advanced technology is, the smaller the populations consumption of resources will be, and the negative effect of large population will be reduced. The more advanced the technology, the more obvious the scale effect of innovation and demand brought by the large population, and the greater the positive effect of population. Therefore, population will become wealth rather than burden in modern times. With the development of technology, the prosperity of the whole society has been promoted. Logically, all parties should cherish the positive effects brought by population size and worry about the negative effects brought by population shrinking.

The problem of aging is not an unsolvable one. Whats more, we are still 20 years away from Japan, and the 20-year gap just means that we see the aging rate as a 20-year gap now, Li added. Li Ties judgment on the urgency of the population problem is totally wrong. Chinas aging level is 20 years worse than Japans, but the effect of any population policy reform often has a 20-year delay. Because one more child, or one less child, will have an impact on the economy only when the child grows up and works, so the economic impact has a 20-year delay. We have been unable to change the number of young working people in the next 20 years. Twenty years later, we will inevitably face the same severe demographic situation as Japan now. What we can and must do is to prevent this trend from deteriorating. After deducting the effect of two child fertility accumulation, our current fertility rate is much lower than that of Japan. Japans fertility rate is 1.4, Chinas natural fertility rate is only about 1.1, and the future problems are much more serious than that of Japan. Faced with such a pessimistic situation, how can Li Tie downplay that there are still decades to solve the problem. In fact, is there any reason not to let go of childbearing completely? Chinas fertility rate is almost the lowest in the world. We are still a few countries with birth restriction. Like a skinny patient who is still taking weight-loss drugs, there are still some people who have no sense of urgency.

Li Tie added, the gap between China and Japan in the past 20 years only means that we now see the gap in the rate of aging as 20 years. If we want to include the population base, it may not be 20 years, it may be 30 to 50 years.. The implication is that low fertility is not a problem in China because of its large population base. But the mainstream economic view is that the aging index refers to the number of old people that each young population needs to support, which has nothing to do with the population base. The population base is large. There are many young people, but there are also many old people. As long as the dependency ratio rises, China will have to significantly extend the retirement age, or significantly increase the tax burden, to make up for the huge deficit of the pension fund.

In a word, the argument of Li Ties long-term overpopulation in China is wrong, the argument process is misleading, and the conclusion is absolutely wrong. We believe that in addition to the above mistakes, Li Tie has also neglected the most important factor in the population economy, that is, the innovation brought about by the large population and the scale effect of national strength. That is to say, the larger the population, the larger the market and the more talents, the more scientific and technological innovation will be generated, which will bring higher living standards and stronger national strength. Especially in the era of Internet and artificial intelligence, thanks to the largest market and talent scale in the world of the United States and China, the Internet and artificial intelligence industries of China and the United States almost crush the rest of the world (see the following for details). Chinas short development is not due to its overpopulation. On the contrary, large population is a favorable factor for economic development and improvement of living standards, and also a core advantage of China. We should try our best to maintain this advantage rather than reduce it.

The reality is that Chinas population born in the past three years is declining at an alarming rate of 3% per year. In the future, as these young people are facing the triple pressure of higher house prices, work and childrens education, the fertility rate will continue to decline. It is no exaggeration to say that China will face an extremely severe low fertility crisis. In the face of this situation, the argument of Chinas long-term overpopulation can be said to be fallacious.


1u3001 The increase of population does not aggravate the difficulty of employment

2u3001 Technology upgrading will not lead to overpopulation

3u3001 Modern technology makes population scale more important

4u3001 Reducing population does not help to increase per capita income

1u3001 The increase of population does not aggravate the difficulty of employment

According to Li Ties statement, he seems to think that the labor surplus is due to the overpopulation. But in fact, whether the labor force is surplus is relative to the job opportunities. All jobs come from peoples needs. A large population will lead to a large demand, so there will be more jobs. China needs more jobs every year than Europe and the United States combined, but China has a larger population and more demand for food, clothing, housing and transportation, so the number of jobs is also more than Europe and the United States combined.

Overall, the impact of population size on employment is neutral, but slightly positive. This is because the more people there are, the easier it is for job seekers to match their jobs. For example, in a place with few people, a person with acting talent may only take acting as a hobby because the audience is too few, but in a place with many people, he may become a professional actor. Moreover, the society with large population is more complex and easy to breed new jobs. If Chinas population is only 1 / 5 of the present, the positions of teachers, salesmen and taxi drivers may also be only 1 / 5 of the present, but the positions of aerospace and high-speed rail, which can only be supported by a large population, may not exist. In the past 30 years, Chinas population has moved from inland to coastal areas, from rural areas to cities, from small cities to large cities, from places with few people to places with many people. This also confirms that the more people there are, the more employment they are likely to have.

This relationship can be confirmed by data. The figure on the left below shows that in 180 countries and regions with data, the higher the population density, the lower the unemployment rate. Among them, the unemployment rates of Argentina and Russia, which are sparsely populated, are 10.6% and 4.3% respectively, much higher than those of Japan (2.3%) and Germany (3.1%). The figure on the right shows that the relationship between population density and urban unemployment rate is weak in 27 provinces of China. If we do not consider several ethnic autonomous regions which are relatively special due to the low population density, the population density is negatively related to the urban unemployment rate.

Figure 1: relationship between population density and unemployment rate

Data of all provinces and regions in China are from the website of the National Bureau of statistics. Among them, the municipalities are classified into the nearest provinces, so as to avoid lowering the unemployment rate in the high population density areas in the map.

Judging from Li Ties remarks, he may think that the reduction of the working age population will help alleviate the so-called labor surplus. But a large population does not mean a surplus of labor force, and a decrease in population does not mean a shortage of labor force. We never think that a shortage of labor force is the reason to fully open up and strongly encourage childbearing.

In the long-term low fertility situation, the reduction of young population leads to the contraction of labor force before the contraction of consumer market, and the sharp decrease of population may lead to the shortage of labor force in the early stage, especially in those industries that need new technology and skills. But it is more likely to cause labor surplus in the long run. Because low fertility will not only weaken the scale effect of population, but also reduce the proportion of children in the future population. Compared with adults, children are more malleable and easier to adapt to the future lifestyle, which not only contains strong future consumer demand, but also can learn and master the skills needed in the future. From birth to adulthood, children have to go through the process of growth, learning, marriage, parenting and so on. All the consumption needs contained in them can become the source of job opportunities. The higher the proportion of children, the better the adaptability of society to future technological changes. Not only is knowledge updated more quickly, but also innovation and entrepreneurship are more active, making job skills and job opportunities easier to match, so as to promote full employment.

The population shrinkage brought by low fertility rate just reduces the proportion of people who are more suitable for the future economic cycle. At the same time, it objectively increases the proportion of people with insufficient employment skills in the future, thus worsening the employment situation. Especially those families with better education background and family environment tend to have fewer children at present, which makes the situation worse.

For example, the fertility rate in Northeast China has been at the bottom in several regions in the medium and long term, and the population has begun to accelerate shrinking. According to the China Employment boom report, since 2016, the employment boom index of Northeast China has been at the bottom of several regions in China every quarter. Among the 55 cities listed in the latest first quarter report of 2020, Shenyang, Changchun and Dalian have the second, seventh and tenth lowest employment prosperity indexes respectively. Of course, the recession of the employment market should be related to the economic downturn in Northeast China in recent years, but it also confirms that the deterioration of population contraction will not alleviate the employment situation.

We will enter the era of technology upgrading and manufacturing upgrading, and the reduction of industrial labor demand in the future has become a major trend, Li Tie said in the article This is true, but it does not support Li Ties conclusion that China has too many people.

The efficiency improvement brought by technology upgrading enables people to invest less working time to win more leisure. More leisure will create more demand. More demand requires more goods and services to meet, and creates new industries and jobs. For example, the emergence of automobiles, while leading to the unemployment of coachmen, has created jobs such as bus and truck driving, automobile research and development, manufacturing, repair and so on. The practitioners in the automobile industry are far more than in the previous carriage industry. It is precisely because technological progress can produce more diversified demand and supply, so the higher the level of technology in society, the more full employment is possible as a whole. A mathematical genius may become a professor of mathematics in modern society, but in agricultural society he may be a loafer in the village.

Although the long-term and overall impact of technological upgrading on the employment market is positive, it may also have short-term and local impact. Especially in the modern economy, various industries are highly specialized. Once the work of an industry is replaced by new technology, the skills accumulated by practitioners in the industry for a long time will lose their place, and these people will face the employment dilemma of how to transform into new industries. If the population is relatively young, the transformation of this new skill will be relatively smooth. On the contrary, if the population is aging, this transformation will become very painful, which will lead to relatively high unemployment due to the mismatch between skills and demand, and also make the international competition of aging countries in these new industries lose competitiveness.

Some people will say, what if one day all the work can be done by artificial intelligence? If that day comes, it means that human beings can obtain goods and services to meet their own needs without labor. The main problem of society will become how to allocate goods and services to individuals. We have reason to believe that the change of this technology will eventually lead to the return of human beings to their more basic significance, that is, survival, reproduction and the pursuit of a better life. Will we restrict multiple births on that day?

3u3001 Modern technology makes population scale more important

To this day, China has turned from the era of world factory supported by low factors, Li said. We will enter the era of technology upgrading and manufacturing upgrading, and the reduction of industrial labor demand in the future has become a major trend. Even in the case of increasing investment in various types of infrastructure construction, we will find that the substitution of technology and capital for labor force is a common phenomenon, rather than regressing to a few decades ago, relying on human sea tactics to carry out all kinds of mass production.

Li Ties implication is that population size is no longer important. In fact, in the era of technological upgrading, although the demand for industrial labor has been greatly reduced, the population size is more important than ever before. This is because the significance of large population size to economy is not only labor force, but also low skilled labor force, and the segmentation and diversification of market demand. The most fundamental driving force for economic and technological development comes from demand. Under the condition of market economy, a large number of people can promote a larger market with subdivision, diversification and fierce competition.

Li Tie seems to think technology and capital are more important than labor, but he may forget that technology and capital depend on the important support of population size. At present, the United States and China are the countries with the best development of artificial intelligence, Internet and 5g technology. This is because the United States is the most populous developed country. In the past, the United States relied on the largest population in the developed countries and the largest market scale in the world to become the world center of high-tech, Internet, film and financial services, especially in the fact that Google, Amazon, Facebook and other companies almost monopolized the global Internet market. China is a developing country with the largest population. Only China and the United States have such a large number of data, large-scale computing and application scenarios in the world. So the worlds largest Internet and AI companies are concentrated in the United States and China. But the old technology powers such as Western European countries and Japan are lagging behind in this round of technology competition.

In the era when scientific and technological innovation has become the main driving force of economic development, the importance of a small number of outstanding talents is self-evident. Li Tie also mentioned that the current problem in China is how to improve the quality and structure of the population. But quality and quantity are complementary rather than either. Under the same quality, the total amount of human resources is directly proportional to the quantity, because the aggregation and scale effect may even show an accelerated proportional relationship, that is to say, more than twice the quantity and more than twice the overall strength.

Because the personal ability required for the success of outstanding talents is usually randomly distributed in the crowd, the larger the population scale is, the more people with outstanding characteristics will be. As long as the mechanism of selecting talents is fair and the environment for talents to play a role is reasonable, the outstanding people will be better at last. Under the same conditions, the best 10000 people selected from 1.3 billion people are definitely better than the 10000 people selected from 300 million people. In the future, almost all medium-sized developed countries have the ability to popularize higher education. Therefore, under the condition that this element is basically equal, how many talents each country will have depends fundamentally on the size of its young population. The more young people are, the more talented scientists will emerge who have made great contributions to social progress.

Population scale effect is realized through the demand and matching of human, goods and capital, so in a system, the closer communication and communication, the greater the population scale effect. In the information age, the convenience of communication and transportation makes communication and communication have a super linear relationship with population scale, that is to say, more than one time of population, more than one time of communication and communication, which highlights the strengthening effect of scale advantage on competitiveness. And in the high-tech industry, the industrial chain is longer and longer, and the comprehensive advantages of market and talents brought by the population scale are more important.

For a country, the smaller the internal language, laws and regulations, market barriers, the more developed the communication and transportation, the greater the mobility of information and personnel, and the greater the scale effect. Sovereign state is the main unit under the framework of modern world. In general, the internal communication and communication of sovereign countries is much more fluent than that between countries, at least the power and responsibility of decision-making can be consistent. So in the western system, the United States, with its advantages of internal language and culture consistency and political unity, although the total population is less than that of the European Union, but technology, especially emerging technology, is far better than that of the European Union, making the per capita GDP of the United States among the major developed countries at the highest level.

Chinas core advantage lies in the fact that it has a population of more than 1 billion people who share the same language, culture, intelligence and diligence, and pursue secular success. The population size that is several times that of the United States and more than that of the whole western system is the biggest base for Chinas development. The United States discussed the high-speed rail plan in the 1960s, but it is still a castle in the air, because of the lack of population density and economic rationality. The reason why Chinas high-speed rail construction can make great progress is that Chinas population size advantage. Similarly, Chinas semiconductor industry can still develop tenaciously after being sanctioned by the United States, because China has a larger market, as well as the scale advantage of scientific and technological talents and R & D investment.

Russia, by contrast, is 1.7 times the size of China, rich in natural resources, and has the highest proportion of people with university education in the world. But Russia has a population of 143 million, which is not at all the same size as China, the United States and the European Union unless it is integrated into a larger economy. Because of this, Russia has no competitiveness in almost any industry except energy and military industry. Even its military industry mainly relies on the foundation left by the former Soviet Union, which had a larger population.

Although the total population of China is more than four times that of the United States, the actual population advantage is not so great. First of all, the United Kingdom, Canada, New Zealand and Australia, together with the United States, are integrated in terms of language, culture and security, and more closely linked in terms of scientific and technological exchanges and cooperation. The system has at least 450 million people, not just more than 300 million in the United States. Second, the ability of the United States to attract global talent has significantly enlarged the actual population base available to the United States. At present, about one-third of entrepreneurs and scientists in the United States are immigrants. If the second generation of immigrants is included, the proportion may rise to about one-third.

That is to say, a large part of Chinas current advantage in population size is offset by the integration of the United States with other English speaking countries, as well as the ability of the United States to recruit elites around the world. Whats more, Chinas natural fertility rate is far lower than that of the United States. According to the current trend, if the fertility rate cannot be greatly improved, after two or three generations, Chinas annual birth population will fall to the level of the United States, and China will completely lose its population advantage over the United States, let alone the whole west. As an important scholar of the official think tank that can influence decision-making, it is regrettable that Li Tie didnt care about or even enjoyed the sad trend.

4u3001 Reducing population does not help to increase per capita income

Li Tie seems to be saying that China has so many poor people because of its large population. But we can also say that China has so many rich people because of its large population. So what really matters is the proportion of poor people, or the per capita GDP of the whole country. A big mistake in this regard is that although Chinas GDP is the second largest in the world, its per capita GDP is not very high because of its large population. In fact, it is more appropriate to say that China is only a middle - and high-income country, and its overall economic strength has ranked second in the world.

That is to say, the large population can be said to be the reason why Chinas GDP is huge, rather than the reason why Chinas per capita GDP is still not very high. This expression is not a word game, but has profound economic meaning. This is because, in the final analysis, GDP measures economic activity, that is, the matching of demand and supply. GDP per capita reflects the level of technology, that is, the efficiency of matching demand and supply. The total GDP reflects the matching total value. This means that a societys technical and economic efficiency basically determines its per capita GDP level. At the same level of technology, the larger the population, the higher the total GDP. For example, within the EU, except for the lower level of development in southern Europe and Eastern Europe, the per capita GDP of other countries is almost the same. Countries with twice the population almost double their GDP.

In fact, according to our analysis in the previous section, if other basic conditions are similar and the population of more populous countries is even higher, the per capita GDP should be even higher, but the higher fluency within Europe weakens the population scale effect of different countries. But within the EU, the most economically and technologically advanced areas are also densely populated metropolitan areas, even in northern Europe, where the population density is not high.

This positive correlation between population and economic development can be more clearly presented within a country. For example, the five provinces (excluding municipalities directly under the central government) with the largest population density in China are Jiangsu, Shandong, Guangdong, Henan and Zhejiang. In addition to Henan, the other four provinces have the highest per capita GDP in China. Of course, in addition to the basic factor of population, there are also historical track, education level, culture and system that affect economic development.

Those who believe that too many people pull down GDP per capita subconsciously regard GDP as stock. For a fixed stock, the more people participate in the distribution, the less natural average to each person. But GDP is actually flow, not stock. Almost all the goods and services we enjoy have been created in the past few years or decades. If the macro stock is not converted into the ability to create long-term flow through accumulation, it will be consumed soon.

First of all, the larger the population, the more intensive the residence, the easier it is to match the existing demand and supply. Even in the sense of per capita, cities are richer than villages, and big cities are usually richer than small cities. Because in cities, especially big cities, there may be businesses and institutions willing to provide rare goods and services. With the increase of social complexity, demand and supply are more diversified and personalized, so the advantages of big cities will become more and more obvious in the future.

Secondly, the larger the population, the more subdivided the existing demand and supply, the higher the specialization, the higher the labor efficiency, and the higher the matching efficiency. For example, there are countless kinds of specialized technical jobs in the manufacturing industry of the Pearl River Delta, which are related to each other. The types and models of spare parts are even tens of millions. This advantage of specialization and integration is hard for countries with small population to copy.

Thirdly, the more the population, the higher the complexity of social economy, the easier it is to generate new demand and supply, breed new industries and economic growth points, and reach new matching. For example, Chinas aerospace, high-speed rail and Indias films are all difficult for small and medium-sized countries to support.

It may be said that the development of economy needs natural resources, and natural resources are stock rather than flow. However, from the perspective of use value, natural resources are also flows, because the use value of resources is constantly changing with the development of human science and technology. 100 years ago, few people realized the value of oil and rare earth. More importantly, the proportion of natural resources in the value of goods and services as a whole is less than 5%, and it will become lower and lower, far less than the value created by the efficiency improvement brought about by population aggregation. Economic activities are carried out around people. Only where there are people can there be demand and supply, and resources will always serve people.

Generally speaking, the proportion of generalized transaction cost to GDP is much higher than the contribution of natural resources. Therefore, as long as the scale of population and the advantages of gathering in saving generalized transaction cost are properly exerted, the deficiency of relatively low natural resources can be compensated or even surpassed to a large extent. If we regard wealth as a stock, the more people we share, the less per capita of course. But from a long-term and macro perspective, wealth is flow, which is the matching of consumption demand and production supply in the economy. The more people participate in the economic cycle, the easier the matching of demand and supply, the higher the efficiency, the smoother the cycle, and the more wealth per capita may be created and enjoyed.

Recognizing the significance of population to economic development, we know that the impact of population contraction on per capita GDP is negative rather than positive. This can be confirmed by the development of Northeast China. The northeast is rich in resources, the proportion of population in the country is declining, and in recent years, it has entered an absolute negative growth. At the same time, the growth rate of per capita GDP in Northeast China is much lower than that of the whole country. From 1980 to 2019, the proportion of population in Northeast China decreased from 9.01% to 7.71%, while the per capita GDP in Northeast China increased from 39% in 1980 to 34.1% in 2019. In other words, the population is relatively reduced, but the per capita GDP is lower.

In fact, this phenomenon of slower per capita GDP growth not only appears in the northeast, but also in Jiangsu Rudong and Hunan Changde, which did the best family planning work in those years. This result also confirms the slogan of less makes more money, which is totally against the assumption of economic law. Under the condition that other factors remain unchanged, the decline of population brings about the simultaneous contraction of demand and supply, the reduction of economic efficiency and the downturn of investment willingness, while the corresponding aging of population is even worse. Population is the foundation and core of economic development. Fewer students will not get rich quickly, but will become poor.

The decline of population brings not only the recession of economic development, but also the relative decline of living standard. As the population continues to decrease, the infrastructure will be difficult to update due to the lack of demand and financial resources, and will eventually be abandoned. Todays big cities will degenerate into medium-sized cities and then into small cities as the population decreases. Airports, hospitals, schools and parks will continue to be closed, leaving residents with fewer and fewer choices.


Now more and more economists have realized that the biggest advantage of Chinas economy is its huge population scale, but the policy of limiting fertility regards the advantage of population scale as a disadvantage to reduce, and the wrong idea of regarding population as a burden also delays the opportunity of population policy reform. Chinas population crisis is imminent. Only by reversing the population decline and raising the fertility rate to the replacement level can China achieve long-term prosperity. Population is the foundation of the country and the nation. Although China has a large population, no one is redundant!

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