A demographic crisis continues to loom over the world’s second largest economy, as new figures out today reveal that China’s population has shrunk for a third consecutive year.
According to the National Bureau of Statistics, the Chinese population fell by 1.39 million over the past 12 months to 1.408 billion, as deaths continue to outpace births.
Recent government interventions, such as cash payouts for those having two or three children, are failing to reverse the trend.
Why is China’s population shrinking?
The blame lies partly with China’s strict one-child policy, implemented in 1980 to tackle runaway population growth, which could result in families who broke the rules facing fines or, in some cases, even losing their jobs.
While the government lifted the restriction in 2016 in a bid to boost birth rates, many say it waited too long to do so, especially since the image of a nuclear family of three is still deeply engrained within Chinese culture.
The legacy of the one-child policy is the most culturally specific cause of China’s demographic troubles, but it’s not the only one.
Population decline is affecting countries across much of the world, Britain included.
Last year, a landmark Lancet study warned that by 2050, over three-quarters of countries won’t have high enough fertility rates to sustain population size over time. A reality that will “completely reconfigure the global economy” and have huge implications for global migration patterns.
Sub-Saharan African countries, the researchers added, are an exception to the rule in that they “have a vital resource that ageing societies are losing: a youthful population.”
A similar set of factors are contributing to plummeting birth rates in countries across the world, China included. Rising costs of living, paired with greater opportunities for women in the workplace, are leading many young people to postpone or rule out starting a family. Better access to birth control and an expanding urban class have intensified the trend further. And many of the countries with low levels of immigration, such as Japan, South Korea and China, are witnessing especially sharp declines.
Another common trend we are witnessing is that, once a declining birth rate sets in, it’s a very difficult pattern to reverse. Pro-natalist government interventions, such as subsidies for parents, don’t seem to be sufficient to buck the trend.
When it comes to the economy, a declining population is a Catch 22: while economic uncertainty is denting the appetite for baby-making, low birth rates - resulting in a rapidly aging population and a declining workforce - create their own set of economic problems.
It will only intensify the economic woes of China, the so-called “factory of the world”.
China’s retirement-age population, aged 60 and over, is expected to increase by 60 per cent to 400 million by 2035. That’s more than the entire population of the United States. The state-run Chinese Academy of Sciences warns that the pension system could run out of money by 2035.
As I wrote last week, warnings that Beijing is undergoing a “Japanification” of its economy have mounted in recent weeks, as yields on Chinese government bonds plunged to all-time-lows, amid concern that a deflationary spiral is setting in.
Japan’s decades-long struggle with deflation stemmed from issues strikingly similar to the ones currently plaguing China: a property sector bubble, high government, low consumer spending but also a declining population.
Why should the rest of the world pay attention to the potentially devastating economic impact of China’s shrinking population?
Because China is a key driver of global growth and has assumed a central position in global supply chains. Meaning, even for Beijing’s key competitors, a healthy Chinese economy is broadly in their own interests.
The impact that this demographic time bomb could have on both China’s economy and the global economy at large should not be underestimated.
Of course, in China’s great rival America, which gets a new President on Monday, the population continues to rise. After a period of low growth at the height of the Covid pandemic, demographic data released last month revealed that the US population is now growing at the fastest pace in over two decades.
Caitlin Allen
Deputy Editor
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