This year, China’s population will shrink for the first time in more than half a century. Xiujian Peng, an economist at Victoria University, writes that this is the beginning of a major transformation, with implications for geopolitics and the global economy.
huhThe world’s largest country – home to more than a sixth of the world’s population – is on the verge of shrinking. After four extraordinary decades in which China’s population grew from 660 million to 1.4 billion, the population is on track to shrink this year, the first time since the Great Famine of 1959-61.
According to the latest figures from China’s National Bureau of Statistics, China’s population barely increased last year: from 1.4121 billion to 1.4126 billion. The 480,000 increase is just a fraction of the annual growth of about eight million ten years ago.
The pandemic and strict lockdown measures may have reduced the number of births somewhat this year, but the slowdown has been going on for years. China’s total fertility rate (number of births per woman) in the late 1980s was 2.6 – well above the minimum required to compensate for deaths of 2.1. But in 1994 the ratio was 1.6 to 1.7, in 2020 it’s barely 1.3 and last year it’s even 1.15.
By comparison, the fertility rate in Australia and the United States is 1.6 births per woman. In aging Japan this is 1.3. †The fertility rate in Belgium is 1.55 [cijfers uit 2020]editor.†
The drop is staggering, as China scrapped the one-child policy in 2016 and introduced the three-child policy last year, backed by tax breaks and other incentives.
The one-child policy since 1980 has increased the sex ratio from 106 boys to 100 girls to 120 boys to 100 girls, and in some counties to 130.
There are many theories circulating as to why Chinese women continue to be reluctant to have children. One is that society has become accustomed to small families, another refers to the increase in longevity, and another sees that the increase in the age of marriage is the main reason, as births are delayed and the desire to have children is said to decrease.
China has fewer women of childbearing age than you might expect. The one-child policy since 1980 has resulted in many couples choosing a boy, increasing the sex ratio at birth from 106 boys per 100 girls (the ratio in most parts of the world) to 120 boys per 100 girls. And in some counties up to 130.
China’s total population grew by 0.34 per 1000 last year. According to forecasts from the University of Social Sciences in Shanghai, this year the population will shrink – for the first time after the famine – by 0.49 per thousand.
This turning point comes a decade earlier than expected. In 2019, the forecast was that the population would only reach a peak of 1.44 billion in 2029. The United Nations predicted that it would peak even later, in 2031-2032, at 1.46 billion.
The University of Social Sciences team expects an average annual decline of 1.1 percent after 2021, which will reduce China’s population to 587 million by 2100, less than half now.
These projections are based on a reasonable assumption that the general fertility rate in China will decline from 1.15 to 1.1 by the end of this decade and will remain there until 2100.
Impact on the economy
But this rapid population decline will have a major impact on the Chinese economy. Because China’s active population peaked in 2014 and is expected to shrink to less than a third of that peak by the end of this century.
China’s elderly population (aged 65 or over) is expected to continue growing for most of that time, outstripping the size of the active population sometime around 2080.
Much of the labor-intensive production with low profit margins will move to countries such as Vietnam, Bangladesh and India.
This means that an average of 100 workers currently support 20 elderly people, but by the end of this century, the same 100 active Chinese will have to support at least 120 elderly people. The average annual decline of 1.73 percent in China’s labor force also predicts much lower economic growth unless productivity increases rapidly.
This rapidly shrinking workforce combined with rapidly increasing labor costs – already twice as high as in Vietnam, for example. As a result, much of the labor-intensive production with low profit margins will move to countries such as Vietnam, Bangladesh and India.
At the same time, China will have to devote more of its productive resources to health and care services to meet the demands of its aging population.
Models from the University of Victoria’s Center for Policy Studies predict that without changes to China’s pension system, pension payments will quadruple from 4 per cent of China’s GDP today to 20 per cent in 2100.
For countries that export many natural resources to China, such as Australia, this population trend presents a challenge. Perhaps they should focus more on producers in other countries. Major importers of Chinese products, such as the United States, will have to gradually focus more on new and emerging production centers.
Despite all the predictions that we are at the dawn of a “Chinese century,” these population projections predict that the impact could spread to other countries, including neighboring India. India’s population is expected to exceed the population of China this decade.
This view originally appeared on The Conversation, an IPS partner.