What China’s Falling Population Means for Its Future?

China, home to 1.4 billion people, represents about one in five people worldwide. However, the country is now confronting a demographic crisis. For the first time since the Great Famine of 1961, China's population is on the decline, with projections suggesting a potential drop of 48% by the end of the century.

This rapid decline is quicker than anticipated and poses serious risks. Economic stagnation could follow, potentially preventing China from surpassing the United States as the world’s largest economy. To sustain its current population levels, each woman in China would need to have two children, but the fertility rate has fallen well below this threshold. In urban centres like Shanghai, the fertility rate was just 0.7 in 2022, even lower than South Korea’s already low rate.

China’s recent economic expansion has heavily relied on a large labour force. As this workforce diminishes, both China’s economic growth and global economic stability could be impacted. The working-age population has been shrinking since around 2015, with a forecasted decline of 300 million by 2050. This reduction could lead to a cycle of decreased demand and productivity, and the main pension fund for urban workers might run dry by 2035, potentially leaving many elderly without adequate support.

To address these challenges, China must rapidly adapt its growth strategies and increase investment in pensions and healthcare. Without such adjustments, economic growth could slow from the current 5% to around 2% over the next 30 years. Businesses and economies dependent on Chinese demand should brace for a decelerating Chinese market. However, this slowdown could benefit emerging economies like India, which are experiencing strong population growth and could drive their own GDP expansion.

China’s approach to population control has been historically strict. The one-child policy, introduced in 1980, was enforced with fines, job losses for government workers, and, in extreme cases, forced abortions and sterilizations. Cultural preferences for sons, who traditionally inherit family names and wealth, led to a skewed gender ratio. Recent censuses show a surplus of over 32 million men compared to women.

Despite replacing the one-child policy with a two-child policy in 2016 and a three-child policy in 2021, these measures have had limited effect on reversing the fertility decline. High living costs, expensive childcare, and housing challenges discourage many from having more children. The financial burden of raising a child often takes up a substantial portion of household income, further deterring potential parents.

Critics argue that the government’s policies are insufficient and overly male-focused, failing to tackle deep-seated social issues. Women, who are increasingly seeking more influence in policymaking, face limited media coverage on these topics due to censorship.

China has some potential solutions to mitigate these demographic issues. The government could consider raising the retirement age, encouraging rural-to-urban migration, and investing in vocational training, automation, and technological advancements. While population decline is a global concern, China’s rapid demographic shift stands out. Other economies facing similar challenges will need to prepare for a future with fewer workers and slower growth.

So, in conclusion, China’s falling population presents significant economic and social challenges that demand urgent and comprehensive responses. The effectiveness of these responses will be crucial in determining China’s future economic trajectory and its position in the global economy.