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China's middle class booms, but aging population threatens prosperity

Carlos Barria / Reuters

Women walk in the financial area of Pudong in Shanghai, April 26, 2011.

China remains the world's most populous nation with 1.34 billion people and has grown to No. 2 behind the United States in economic power, but its own policies contribute to potential changes in both rankings.

When the world welcomes its 7 billionth person on Oct. 31, as the United Nations Population Fund predicts, China will still be home to more than one in every seven inhabitants of the planet.

But changing demographics brought on largely by birth-limit rules may slow China's growth, analysts say. The country allows urban women to have only a single child; rural women, two. That's fewer than the 2.1 overall necessary to keep the population count level.

India, with a higher rate of 2.6 births per woman, by 2030 may overtake China as No. 1 in population.

Carlos Barria / Reuters

Students attend their college graduation ceremony at Fudan University in Shanghai on July 2, 2011. A 2011 study by the state-run Chinese Academy of Social Sciences paints a rosy picture of graduate employment, saying only 6.7 percent of 2010 graduates with four-year or vocational degrees were still looking for work six months after leaving campus. The vast majority had found jobs or were pursuing further studies. Unemployment was down almost 3 percent from 2009.

China's birth policy also has made the nation one of the most rapidly aging countries in the world, analysts say. The demographic change may be an Achilles' heel in China's economic growth as well as its population count, CNBC reported.

China over the past 30 years became the world's major manufacturing center. Its export-dependent prosperity lifted hundreds of millions out of poverty and into the middle class.

However, a global economic downturn in 2009 reduced demand for Chinese exports. To help keep the economy rolling along, China's 12th Five-Year Plan adopted in March 201 emphasized the need to increase domestic consumption in order to make the economy less dependent on exports.

"The more Chinese population ages, that's more of a headwind against internal consumption," Michael Yoshikami, Founder & CEO of YCMNET Advisors, told CNBC. "There're studies out that suggest the Chinese aging population is going to skyrocket particularly as a result of the one child rule."

Carlos Barria / Reuters

A boy sleeps as he is pushed in a shopping cart at an IKEA store in downtown Shanghai on May 11, 2011. China's headline consumer price inflation slowed to 5.3 percent in the year to April from 5.4 percent in March, according to the National Bureau of Statistics.

China counted its people age 60 and up at 178 million, or 12.5 percent of the total population, in 2010. That figure is expected to double by 2030.

In comments published Oct. 22, Chinese Premier Wen Jibao addressed issues such as inflation, housing costs, weakened demand from rich economies, and the pressure to secure jobs for millions of university students and rural migrants. 

"Currently, economic growth is slowing and external demand is falling, and we should make employment even more of a priority in economic and social development, doing our utmost to expand employment," Wen told officials in Guangxi, a poorer region next to export-driven Guangdong province, the official People's Daily reported.

Those efforts would include "ensuring an appropriate rate of economic growth" and supporting labor-intensive industries, small businesses and private firms, he said.

- msnbc.com editors Natalia Jimenez and Jim Gold, with wire service reports.

See our slideshow: China's booming middle class

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Carlos Barria / Reuters

A man looks at the Huaxi village, China, on Dec. 2, 2010. In China's richest village of Huaxi, a booming market town of 36,000 in the affluent eastern province of Jiangsu, every family has at least one house, two cars and $250,000 in the bank.