Growth of the country's working-age population will slow down and lead to labor shortages, a leading expert warned yesterday after it was announced this week that the number of Chinese aged 65 or above hit 100 million.

To sustain economic development, the country will have to shift from a labor-intensive growth mode and cope with an ageing population, said Cai Fang, a director of the Chinese Academy of Social Sciences.

"Between 2005 and 2030, China's working-age population (those between 15 and 64) is projected to grow at 0.4 percent a year, far lower than the global average of 1.2 percent," Cai said, quoting United Nations projections.

Coupled with the ageing of the workforce itself for example, those aged between 50 and 64 will increase by 67 percent the country will inevitably witness a general shortage of workers, Cai, the chief of the academy's Institute of Population and Labor Economics, told China Daily.

The mainland's population reached 1.306 billion at the end of last year. Slightly more than 100 million, or 7.69 percent of the total, were aged 65 or above, pushing China into the ranks of ageing societies, according to latest official figures.

The number of senior citizens will account for at least 10 per cent of the total population by 2017, Cai said.

"As a result, the growth rate and the absolute number of the working- age population will decline, which will lead to an inevitable labor shortage," he said.

The working-age population was estimated at 918 million in 2005, or 70 percent of the total, according to Wang Guangzhou, a researcher with the China Population Development Center. That group is expected to account for 72.14 percent of the country's total and peak at 997 million by 2013.

From 2015, the growth rate of the working-age population will shrink dramatically, Cai said.

A plentiful labor supply has long contributed to China's economic miracle. At least one-fifth of the country's GDP growth between 1978 and 1998, for example, was contributed by the migration of the workforce from agriculture to industrial and services sectors, according to Cai.

The shortage of workers will result in an increase of wage bills for skilled labor, which could erode China's comparative advantage in labor-intensive industries, he said.

Factories are already finding it hard to employ migrant workers at low salaries despite a contingent of 150 million awaiting migration from rural to urban areas.

The change of labor supply patterns should prompt the country to change economic growth path, for example, by developing capital- or technology-intensive businesses, Cai said.

Bao Minghua, a researcher with Renmin University of China, said the increase in labor costs as a result of worker shortage will not significantly affect foreign investment.

"China cannot rely only on inexpensive labor to attract foreign investors," Bao said recently. "The increasing number of high-technology industries in the country do not count on cheap labor."

(China Daily September 1, 2006)