as one of the important factors that make it possible for China's economy to maintain rapid growth. However, Cai Fang, Director of the Institute of Population and Labor Economics, Chinese Academy of Social Sciences, warned at a lecture in early May that China's surplus rural labor force is not as large as thought and that China will soon experience the transition from labor surplus to labor shortage. He predicted that the turning point would occur probably in 2009. In response, Hou Dongmin, Director of the Institute of Population, Resources and Environment of Renmin University of China, and Deng Yuwen, researcher at the China Society of Economic Reform, analyze the expected impacts of transition on China's future growth mode (in sequence).

Mega Transfer-Mega Headache

According to a recent report issued by the Institute of Population and Labor Economics, Chinese Academy of Social Sciences, China will soon say goodbye to the age of labor surplus and enter a new era of labor shortage.

The report said that there existed an overestimation of China's total surplus population involved in agriculture and it put the figure at 50 million. In my opinion, this estimate is questionable.

Since 1978, China has lost more than 13 million hectares of arable land to non-agricultural purposes. Meanwhile, more machines are being used in seed sowing and reaping. The use of pesticides and fertilizers are also helping to relieve farmers from the heavy pressure of agricultural work.

However, since 1978, despite the acceleration of urbanization and the transfer of the agricultural population to other sectors, there was still a net increase of almost 200 million agricultural laborers. Although 40 percent of current 500 million agricultural laborers have turned to secondary and tertiary industries, there are still about 300 million rural laborers engaged in the primary industry, the same as the number in 1978. In line with the aforementioned report, China now has only a surplus of 50 million rural laborers. It means, since 120 million hectares of arable land can provide enough employment opportunities for about 250 million labors of the total 300 million involved in the primary industry, to realize the full employment of the agricultural population, 0.48 hectares of arable land per- capita on average is enough. Nevertheless, even in 1978, when the average per-capita arable land was 0.45 hectares, the surplus agricultural population was no less than 50 million. Thus, the estimated number of 50 million surplus laborers is unacceptable.

Is it true that among China's rural laborers, 300 million are engaged in the primary industry? The transfer of rural laborers is a complex process, so this number is unlikely to be absolutely accurate. However, based on the proportion of people aged 40-64 years to the total rural population as revealed by national census statistics, this number is basically reliable.

The transfer of the agricultural population is a long-term headache. In Japan, each agricultural worker takes care of 1.2 hectares of farmland on average and their grain production depends on government subsidies. If the WTO-sponsored Doha Round of trade talks can finally reach an agreement on curbing farm subsidies, Japan's grain production, which is no match for world's leading agricultural countries, will be severely hit. Even if we take the estimated 300 million agricultural laborers in China's primary industry as the denominator, their per-capita arable land is only 0.36 hectares. However, if China's agriculture develops to Japan's scale, only 100 million laborers would be necessary, that is, 200 million of current agricultural laborers need to be provided with other jobs. Obviously, against the background of the increasing liberalization of agricultural trade, how to transfer the large amount of agricultural population remains a big question. Besides, among the current 500 million agricultural laborers, it's hard to say that the migrant workers involved in the secondary and tertiary industries have totally given up agricultural production.

In the three decades since China began to adopt the reform and opening-up policy, 200 million people have been liberated from farming, and the world market is now overflowing with Chinese products.

In the coming years, the combined labor force in China and India will amount to 2 billion, and the corresponding productivity will be astonishing. The competition between rising developing countries and the international market's reaction toward this will make the process of surplus labor transfer more complicated.

As a matter of fact, China's economic growth can no longer follow the current path and industrial upgrading is inevitable. When industries begin to turn to the capital-intensive mode, productivity will increase and the demand for workforce will decrease. Therefore, even if China's economy continues at this rapid pace, the problem of population, particularly the transfer of surplus rural laborers, will plague China for many years to come.

China's population problem is also reflected in the discord between population and resources and environment. At the next stage, this conflict will become increasingly striking, which will make the relationship between population and economic development more complicated and unstable.

Against this backdrop, we must realize that the large population will long remain a problem of far-reaching consequences. Given these facts, it's still too early to say that China's population and employment will see a historical turning point.

The Turning Point

China's economic miracle is taking full advantage of its huge, high-quality and low-price labor force. At the same time, the country still has a big labor surplus and a high capital accumulation rate. Its economic growth mode is characterized by large input, but this mode has managed to support the country's rapid economic development. This is widely recognized as the population bonus.