China's potential economic crisis

Much has been made lately about the impending crisis in the American Social Security system: how when it was first enacted, there were forty-two workers paying in for every person who received benefits, and how in the next ten-to-twenty years, that ratio will be more like two for every one. Dire predictions have been made.

What has been less frequently analyzed is the analgous situation in China which derives from their population control policies. Consider:
Historically speaking, every married Chinese couple would have five children on average. Those five children would get married and have an average of five children each. Since China has no social security system, it falls to relatives to support elderly Chinese--and this was a hardship, but possible when there were thirty-five children and grandchildren for every elderly couple. That gives a ratio of seventeen to one, if you round generously.

With China's new birth rate policies, each married couple has one child. That child then marries the only child of another married couple and this new union in turn produces one grandchild. Now instead of thirty-five offspring supporting two people, you have three offspring supporting four. 17:1 isn't particularly sustainable on its own, let alone 3:4.

Further, China's first "baby boom" generation is currently 30-40 years of age. They will be reaching the point at which they can no longer work ("retirement age" seems like a kind of euphemism when applied to China's state capitalism) in twenty to thirty years. They will be followed ten years later by the second and even larger wave which is followed by an abrupt drop in demographics. These will be people who are used to a modernized China. They will probably have owned their own automobiles, have traveled outside the country, and they will be used to a steady supply of consumer goods. Their retirement demands will be much greater than the means they will have to reach them. This will also mark a precipice in the manpower of Chinese labor and military capacity, as well as buying power. The economic consequences could be catastrophic.

However, twenty years is a long time. The Chinese government could simply drop the birth restrictions in ten years and put the problem off. There is already a policy in place which allows two parents who are single children to have more than one child, in an effort to allay this concern. They could enact a functioning social security system based on contributions, since China's per-capita GDP growth is among the strongest in the world and the current young generation will probably have the extra money to pay into a pension fund. Or they could simply let their population starve to death in the tens of millions. It would hardly be the first time.