China’s demographic challenge

On the 17^th of January 2020 China’s National Bureau of Statistics released the birth-rate figures for 2019. They made grim reading for the leadership. At 10,48 per 1.000, the 2019 birth rate figure was the lowest since 1949 and the founding of the People’s Republic of China. The Chinese state media was cautious. The Global Times was uncertain on January 17; admitting that “the latest figures reflected severe structural and demographic problems, which is alarming and merits policy attention”, but nevertheless asserting “there is no population crisis so far”. A couple of weeks earlier, the Reports on China’s Population and Labour issued on the 3^rd of January by the Chinese Academy of Social Sciences had already pointed out the longer-term structural demographic problems facing the Chinese workforce and the Chinese economy.

The trend is stark. In 1987 the birth rate figure was around 23 per 1.000, showing that it had halved during the half century running from 1988-2019. The reason for this was initially the “one child policy”, introduced in 1979, which was only lifted, to two children in 2015. However the birth rate has continued to decline, after a slight upturn in 2016, the birth rate resumed a downward trend in 2017, 2018 and now 2019. As the initial effects of the 2015 second-child policy wear off, the number of newborns will continue to decline in the following years. Consequently, China’s population is set to enter a fast-shrinking phase in five or six years time, and may indeed have already started to shrink.

What is now established is a structural trend towards an ageing society, a demographic time bomb as the proportion of retired 65+ continuing to grow. Slowly but surely a financial crisis is hitting China as a shrinking ageing workforce is having to shoulder the burdens of a growing retired population. Figures bandied around were that in 2018 there were 167 million people over the age of 60; but by 2050, there were likely to be 487 million, representing more than a third of the population.

Two significant contrasts, with Japan and with India, can be made from China’s population profile. Japan faces the same problem of an ageing shrinking workforce, but is facing it from a position of comparative wealth and much greater use of robotics to maintain industrial output. Unlike Japan (and most of the West), China is growing old without first having grown rich. A significant contrast is with India. Its demographic profile is much younger than China’s. Whereas China will be faced with a declining older workforce, India will have an expanding younger workforce. This gives India a demographic workplace bonus, whereas China’s declining older workforce is a demographic disadvantage. This demographic factor perhaps indicates that India’s economic growth during the coming century may be more sustainable than China’s?

If “demographics is destiny”, then Xi Jinping’s China Dream of economic success is being challenged by the demographics now facing China.