Jan 20, 2013 11:01 AM ET
Following 4th Quarter growth numbers for the Chinese economy, economic expansion in 2012 was recorded at 7.8%, the weakest expansion rate since 1999. Though for the past twenty years, China has recorded an average annual expansion rate of over 10%, with its highest growth occurring in 2007 at 14.2%, the slowing rate of economic growth reveals potential difficulties for continued economic recovery in the future. One key element behind the decline is the shrinking Chinese labor force. In 1979, the government instituted a policy that restricted families to only one child. The consequences of the one-child policy are now being realized; in the last year, there was a decline of 3.45 million in the labor force. Furthermore, the United Nations forecasts that from 2015-2025, there will be a population decline of 24 million in the 15-59 age demographic. As a result, the Chinese government will be facing increasingly lower rates of expansion – Ma Jiantang, head of China’s National Bureau of Statistics, estimates that the country’s potential economic growth will slow to 6% by 2020. While “rural-to-urban migration, urbanization and industrialization” will continue to contribute to China’s economic expansion, the labor market is an important determinant of the rate of that growth. As the new government under incoming premier Li Keqiang looks toward China’s future economic health, there is a possibility for relaxation of the one-child policy.