China’s demographic crisis will affect us all

China’s population is shrinking at a rapid rate, with Beijing recording its lowest number of newborn babies last year since the founding of the People’s Republic in 1949.

The impact this demographic time bomb will have on China’s economic standing in the world – and on the global economy at large – should not be underestimated. 

New government data reveals that the population fell by over two million last year, to 1.41 billion. This most recent decline is double that of the previous year. And 2022 was the first time that the Chinese population had fallen since the mass deaths of the Mao-era famines in 1961. It was a fall that allowed India to overtake China as the world’s most populous nation. 

Beijing’s lowest ever birthrate of 6.39 births per 1,000 people in 2023, down from a rate of 6.77 in 2022, puts it on par with low birth rate countries of Japan and South Korea.

Adding to China’s demographic shift, total deaths rose 6.6% last year to 11.1 million – the highest death rate since 1974 during the Cultural Revolution. While data on China’s Covid deaths is patchy, this is almost certainly in large part down to Beijing’s great unlocking at the start of 2023. 

As for falling birth rates, the reasons are manifold. 

China’s expanding urban class cite deterrents such as the steep cost of living and career priorities after a three-year pandemic period. 

Dr. Leta Hong Fincher, author of Leftover Women, argues that Chinese women are staging a “quiet revolution”. Despite Xi Jinping’s pleas for them to stay home and have babies, increasingly well-educated women are pausing before giving up their careers and independence. 

And, as Christina Maags writes in Reaction, despite the government lifting its one-child policy in 2015 in an attempt to stem population fall, decades of promoting a nuclear family of three has left this image deeply ingrained in Chinese society.

China’s post-pandemic economic woes are only further denting the appetite for baby-making. Yet, while the population’s financial worries are a cause of the demographic trend, the trend itself will create its own set of economic problems. 

China has long relied on a now ageing workforce as a key driver of its economic growth. Aside from a growing shortage of workers in the manufacturing sector, concern is mounting about how China will care for the elderly. 

The country’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.

This demographic trend isn’t bad news for everyone. It will create a host of investment opportunities in certain sectors. Now is the time to invest in robotics, for instance – whether it be carer robots for the elderly or robots to address the growing need for automation in the manufacturing sector.

What this new data does undeniably mean though, is that global growth forecasts need careful revision. 

It calls into question the accuracy of forecasts in recent years which estimate that China – currently the word’s second largest economy – will soon overtake the US as the world’s biggest. After all, these predictions have been made using data which vastly underestimated China’s population decline. Indeed, as recently as 2022, the UN World Population Prospects from 2022, forecast that China’s population wouldn’t start declining until 2030.

That is not to say that the US – and other Western competitors – should relish this new data. Given the central position Beijing has assumed in global supply chains, a healthy Chinese economy is broadly in all of our interests. 

Can we expect this demographic trend to continue? It seems likely. 

After imposing its one-child policy in the 1980s to control overpopulation, China was very successful in altering demographic patterns. But interventions this time round may well prove less fruitful. 

As we have witnessed in countries such as Japan, once a birth rate decline sets in, it’s a difficult trend to reverse. 

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