China’s Population Shrinks First Time In 60+ Years

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
January 24, 2023

China’s Population Shrinks First Time In 60+ Years

IN THIS ISSUE:

1. China’s Population Declined In 2022 - Implications

2. China’s Population Falls, First Time In Six Decades

3. What Falling Population Trend Means For China

4. What China’s Population Trend Means For The World

5. What The Chinese Government Is Doing In Response

Overview: China Population Declined In 2022 – Implications

China, the most populous country in the world with over 1.4 billion people, saw its population fall by almost 1 million people in the last year, according to China’s National Bureau of Statistics (NBS). It was the first decline in China’s population in 61 years when a famine killed tens of millions of people.

The NBS reported last week that China’s population shrank by some 850,000 people last year to 1.41 billion people. The question is, should we be concerned? Some demographers say it’s no big deal. Others believe it is a big deal since this trend, they say, is likely to continue for years, leaving China with fewer workers to support its growing economy.

Chart showing annual change in Chinese population

This development shouldn’t really surprise anyone since China has implemented policies, such as its “One Child” rule, among others, to slow its population growth since the 1980s. But in recent years, China has become concerned about its falling birthrate and dropped the One Child rule in 2015. Now women in China are allowed to have up to three children.

Yet despite that, China’s population actually declined last year for the first time in over 60 years. Experts warn that, if sustained, the trend could also pose a problem for the rest of the world, with China playing a key role in driving global growth as the second-largest economy.

Today, we’ll look at both sides of this argument.

China’s Population Shrinks, First Time In Six Decades

China may be one step closer to losing its place as the world’s most populous country to India after its population shrank for the first time since the 1960s.

The country’s population fell in 2022 to 1.411 billion, down some 850,000 people from the previous year, China’s National Bureau of Statistics announced during a briefing on annual data last week.

The last time China’s population decreased was in 1961, during a famine that killed tens of millions of people across the country.

This time, a combination of factors are behind the drop: the far-reaching consequences of the One Child policy China introduced in the 1980s (but has since abandoned); changing attitudes toward marriage and family among Chinese youth; entrenched gender inequality; and the challenges of raising children in China’s expensive cities.

A falling population is likely to exacerbate China’s problems with an aging workforce and drag on growth, adding to its woes as it struggles to recover from the pandemic.

As noted above, the population decline is partially a result of China’s One Child policy, which for more than 35 years limited couples to only having one child. Women caught going against the policy were often subject to forced abortions, heavy fines and eviction.

Alarmed by the falling birth rate in recent years, the government scrapped the rule. In 2015, it allowed couples to have two children, and in 2021 raised this to three. But the policy change and other government efforts, such as offering financial incentives, have had little effect – for various reasons.

High living and education costs and skyrocketing property prices are major factors. Many people – especially in cities – face stagnating wages, fewer job opportunities and grueling work hours that make it both difficult and expensive to raise one child, let alone three.

These issues are exacerbated by entrenched gender roles that often place the bulk of housework and childcare on women – who, more educated and financially independent than ever, are increasingly unwilling to bear this unequal burden. Women have also reported facing discrimination at work based on their marital and/or parental status, with employers often reluctant to pay maternity leave.

Some cities and provinces have begun introducing measures such as paternity leave and expanded childcare services. But many activists and women say it’s far from enough.

And frustrations only grew during the pandemic, with a disenchanted younger generation whose livelihoods and wellbeing were derailed by China’s uncompromising zero-Covid policy.

What This Falling Population Trend Means For China

A falling population is likely to add to the demographic problems China is already facing. The country’s population is already aging and its workforce shrinking, placing tremendous pressure on the younger generation.

China’s elderly now make up nearly a fifth of its population, officials said last week. Some experts warn the country could be heading down a similar path to Japan, which entered three decades of economic stagnation in the early 1990s that coincided with its aging demographics.

“The Chinese economy is entering a critical transition phase, no longer able to rely on an abundant, cost-competitive labor force to drive industrialization and growth,” said Hong Kong & Shanghai Banking Corporation chief Asia economist Frederic Neumann.

“As the supply of workers begins to shrink, productivity growth will need to pick up to sustain the economy’s heady pace of expansion.”

China’s economy is already having problems, expanding by just 3% in 2022 – one of the worst performances in nearly half a century, thanks to months of Covid lockdowns and a historic downturn in the property market.

The shrinking workforce could make recovery even more challenging as China resumes outward travel and abandons many of the stringent restrictions it has upheld for the past few years due to Covid.

There are social implications, too. China’s Social Security system is likely to come under strain as there will be fewer workers to fund things like pensions and healthcare – as demand for these services surges due to the graying population.

There will also be fewer people to look after the elderly, with many married people already working to support their two sets of parents and in many cases, two sets of grandparents as well.

What China’s Population Trend Means For The World

Given its role in driving the global economy, China’s challenges could have implications for the rest of the world. The Covid pandemic illustrated how China’s domestic problems can affect the flow of trade and investment, with its lockdowns and border controls disrupting supply chains.

Picture showing a crowd of Chinese citizens

Not only would a slowing Chinese economy drag on global growth, it could threaten China’s ambitions of overtaking the United States as the world’s largest economy.

“China’s limited ability to react to this demographic shift will likely lead to slower growth outcomes in the next twenty to thirty years and impact its ability to compete on the world stage with the United States,” the US-based Center for Strategic and International Studies said in an article on its website last year.

China also looks likely this year to lose its place as the world’s most populous nation to India, whose population and economy are both booming.

“India is the biggest winner,” tweeted Yi Fuxian, who studies Chinese demographics at the University of Wisconsin-Madison.

However, while Yi said India’s economy could one day surpass the US, it has some way to go yet. India is the world’s fifth-largest economy, having overtaken the United Kingdom last year, and some experts have voiced concern the country isn’t creating enough employment opportunities to keep up with its expanding workforce.

Still, some researchers say there could be a silver lining to the news from China.

“For both climate change and the environment, a smaller [Chinese] population is a benefit not a curse,” tweeted Mary Gallagher, director of the International Institute at the University of Michigan.

Peter Kalmus, a climate scientist at NASA, argued that population decline in China shouldn’t be viewed “as a terrible thing.” While stopping short of calling it a good thing, he believes China’s falling population trend has its benefits.

What The Chinese Government Is Doing In Response

Chinese officials have ramped up efforts to encourage larger families, including through a multi-agency plan released last year to strengthen maternity leave and offer tax deductions and other perks to families.

Chinese leader Xi Jinping pledged in October to “improve the population development strategy” and ease economic pressure on families.

“[We will] establish a policy system to boost birth rates, and bring down the costs of pregnancy and childbirth, child rearing, and schooling,” Xi said. He went on to say,

“We will pursue a proactive national strategy in response to population aging, develop elderly care programs and services, and provide better services for elderly people who live alone.”

Some places in China are even offering cash incentives to encourage more births. One village in southern Guangdong province announced in 2021 it would pay permanent residents with babies under two and a half years old up to $510 a month – which could add up to more than $15,000 in total per child. Other places have offered real estate subsidies for couples with multiple children.

But those efforts have yet to see results, with many experts and residents saying much more sweeping national reforms are needed.

The bottom line is that while demographers disagree over whether China’s declining population is a good thing or a bad thing, almost all believe this trend is going to continue for at least several more years, maybe over a decade.

This almost certainly means a drag on the global economy. How much so remains to be seen. I’ll keep you posted.

Very best regards,

Gary D. Halbert

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