Despite the rollback of China’s one-child policy, and even after more recent incentives urging families to have more children, China’s population is steadily shrinking — a momentous shift that will soon leave India as the world’s most populous nation and have broad rippling effects both domestically and globally.
The change puts China on the same course of both ageing and shrinking as many of its neighbours in Asia, but its path will have outsize effects not just on the regional economy, but on the world at large as well.
Here’s why economists and others are alarmed by the developments.
China’s shrinking workforce could hobble the global economy.
For years, China’s massive working-age population powered the global economic engine, supplying the factory workers whose cheap labour produced goods that were exported around the world.
In the long run, a shortage of factory workers in China — driven by a better-educated workforce and a shrinking population of young people — could raise costs for consumers outside China, potentially exacerbating inflation in countries like the US that rely heavily on imported Chinese products. Facing rising labour costs in China, many companies have already begun shifting their manufacturing operations to Vietnam and Mexico.
A shrinking population could also mean a decline in spending by Chinese consumers, threatening global brands dependent on sales of products to China, from Apple to Nike.
The data is bad news for China’s crucial housing market.
In the short term, a plunging birthrate poses a major threat to China’s real estate sector, which accounts for roughly a quarter of the country’s economic output. Population growth is a key driver of housing demand, and homeownership is the most important asset for many Chinese people. During widespread pandemic lockdowns that dampened consumer spending and export growth, China’s economy became even more dependent on the ailing housing sector.
China’s shrinking workforce may not be able to support its growing, ageing population.
With fewer working-age people in the long run, the government could struggle to sustain an enormous population that is growing older and living longer. A 2019 report by the Chinese Academy of Social Sciences predicted that the country’s main pension fund would run out of money by 2035, in part because of the shrinking workforce.
Economists have compared China’s demographic crisis to the one that stalled Japan’s economic boom in the 1990s.
But China does not have the same resources as a country like Japan to provide a safety net for its ageing population. Its households live on much lower incomes on average than in the US and elsewhere. Many older Chinese residents rely on state pension payments as a key source of income during retirement.
The crisis has been decades in the making.
China introduced the one-child policy in the late 1970s, arguing that it was necessary to keep population growth from reaching unsustainable levels. The government imposed onerous fines on most couples who had more than one child and compelled hundreds of millions of Chinese women to have abortions. Many families favoured boys over girls, often aborting baby girls, resulting in a huge surplus of single men in the Chinese population.
China relaxed the family size curbs in 2013, but many experts said the change had come too late.
New York Times News Service
