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China's 2020 Census Shows Population Barely Growing, Staring At Decline

Editor, TRANSFIN.
May 12, 2021 5:26 AM 5 min read
Editorial

China’s population barely grew in the last decade, highlighting the country’s looming demographic crisis.

What’s Going On?

As per data compiled by its latest decadal census, the Chinese government revealed today that the country's average growth rate was 0.53% over the last 10 years. This brings its population to 1.41 billion (+72 million since 2010).

This means China still holds the distinction of being the world's most populous country (unless India’s impending 2021/2022 census throws a surprise). But the pace of China’s population growth has slowed to the lowest point since the 1950s.

With government attempts to boost the birth rate failing and with mass American-style immigration out of the question, the country is likely to enter “unstoppable” population decline within the next few years.

This demographic shift will invariably have major consequences on the Middle Kingdom - and the rest of the world.

 

How Serious is China’s Population Crisis?

The devil’s in the numbers. In 2020, China registered an 18% YoY drop in annual births - the fourth such consecutive decline. The country's total fertility rate (average number of babies a woman will have over her lifetime) has also dropped to 1.3 - lower than even the US (1.64).

The drop in population growth has been accompanied by a jump in the number of older Chinese and a drop in the working-age population (18-59). Chinese aged 60+ now constitute 18.7% of the population (up from 13.3% in 2010) while the working-age share has declined to 63.35% (from 70.1% in 2010).

Last month, there were reports that the latest census report could show China registering a population decline. The country narrowly missed this, but its population peak is not far away. In fact, by the 2060s, after years of negative growth, the population could fall back to 1990s-levels.

 

Down for Demographic Dividends

As a country develops, a decline in birth rates is natural due to rising education, income levels and standard of living, which encourage couples to opt for fewer (or no) children.

This trend can be seen in many advanced economies. South Korea and Japan are two popular examples. Last year, the former recorded more deaths than births for the first time in its history. And a rapidly shrinking (and ageing) population has been Tokyo’s top worry for years now.

A predominantly young population is a critical advantage that can be a vehicle for rapid growth and development (if accompanied by the right economic policies, of course).

“Tiger” economies like South Korea, Taiwan, Hong Kong and Singapore were able to exploit their demographic dividends (when working age population > non-working counterpart) in the 1960s, enabling the so-called East Asian economic miracle. Since the 1980s, countries like China and India began growing robustly as they invested in their massive young populace themselves. African nations are expected to have the benefit of predominantly young populations for many decades to come.

 

How Does an Ageing Population Impact an Economy?

For a country, exploiting its narrow demographic window at the earliest is of great importance because as populations age, they give way to demographic transition i.e. An ageing population and a declining workforce. This translates to higher healthcare costs and pension allocations for the elderly even as there may be a decline in productivity on account of a limited labour pool.

On the other hand, if a country fails to capitalise on its young populace, it could lead to a demographic burden wherein not enough jobs and opportunities are generated for a growing labour force, leading to unemployment, stagnant growth or even civil unrest.

Many fear that this could be India’s fate unless bold action is taken to remedy growing joblessness, rampant under-employment and untapped potential. The erstwhile East Asian “Tigers” are now catering to increasingly aged populaces; but as developed nations, they are better positioned for the challenge. If India’s economic growth falters, its copious demographic dividend could turn into a disaster.

FYI: While most European nations are facing declining birth rates, the US population curve has historically been rather stable. This is due to high levels of immigration. A Lancet study projected that while China's population will halve by 2100, America's will actually climb by 3%.

 

Why is China’s Population Growth in Decline?

It’s not surprising that China finds itself staring at a population decline. However, the pace of deceleration since 1949 has been erratic and largely influenced by artificial factors.

Look at the chart above - the growth rates for India, Japan and the US largely follow a steady and natural downward slope. China’s curve, on the other hand, is all over the place. In the first three decades of communist rule, civil conflict, famine and disastrous economic policies like the Great Leap Forward and the Cultural Revolution meant wild changes in population levels. In the 1970s, centralised family planning was gradually introduced, culminating in the controversial one-child policy.

In 1979, China was a radically different nation vis-a-vis today. Most of the country was dirt-poor, economic planning was severely centralised, two-thirds of the populace was under 30 and the fertility rate was 6. The country was essentially being weighed down by a massive demographic burden.

This was when the one-child policy was implemented under the aegis of Deng Xiaoping to slow population growth. The Government decreed that families could have only one child; violators were fined, publicly shamed and faced loss of employment and forced abortions.

FYI: India's dark tryst with forced family planning took place in the 1970s - a Government-led "gruesome campaign" that sterilised millions of largely poor men in the name of population control.

Meanwhile, the economic liberalisation of the 1980s opened the Chinese economy. By 2011, China had overtaken Japan to become the second-largest economy. Extreme poverty had plummeted and the country had entered upper-middle-income status. Along the way, however, a birth rate that had plateaued on account of forced family planning began plummeting on account of growing affluence.

In late 2015, alarmed at the prospects of a declining population, Beijing revoked the one-child policy. Couples were allowed to have two children now (unless, of course, if they lived in Xinjiang). In some provinces, even a third child no longer incites state retribution. This led to a brief uptick in the birth rate - but then a return to free-fall.

FYI: In both China and India, decades of sex-selective abortions have resulted in extremely skewed sex ratios. An excess of 70 million+ men, to put it in context. This gender imbalance has its own long-term economic and societal consequences.

 

No Babies, Mo’ Problems

An inverted population pyramid (where elderly > youngsters) poses serious challenges for any country, no matter how developed. But for China, the situation is all the more precarious because the one-party government has derived its legitimacy from decades of spectacular economic growth. A slump in growth or incomes may spark popular discontent, which could lead to civil strife. (This is also why Beijing is reluctant to raise the retirement age - something policymakers suggested as a way to boost the working-age population.)

For the rest of the world, a slowdown in the second-largest economy may drag down global growth and put international trade under strain. Given that India’s demographic dividend may last till 2055, this might give us a window to take China’s place in the world economy. But considering our long list of problems, obstacles and things-we-were-supposed-to-do-years-ago, that might be asking for a bit too much.

FIN.
 

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