While China currently looks to be taking over the world, it faces serious problems. For right now, the PRC's economy is slowing significantly. But in the longer term the country looks to be caught in the classic ‘middle income trap’, in which the population grows old before the country becomes rich.
Now comes news that China is poised to move into long term population decline, with nearly a third of its population above working age and new births plummeting. Overall, new births were down 15% from 2019, while in some regions the decline was as much as 30%. China lacks a true social security net and has relied on the younger generation to support the elderly, but this system will become increasingly strained as the population continues to age rapidly--and to shrink. For more specifics:
Note well--this isn't simply a 'problem'. It's a crisis for the economy and for the social fabric of the country.
The second half of the article goes into the implications of this crisis, beginning with a quote from an official at a government supported population think tank:
“We can say that even though the number of births in 2020 might be the lowest in recent decades, it is likely to be the highest in the next few decades, unless miraculous achievements were made via encouraging births in the future.”
This is not so far from the central government’s own estimates. Over the next five years, China’s total population will enter the range of zero growth, meaning the annual gap between births and deaths will shrink to only 1 million, even though the total population will remain above 1.4 billion, according to the China Population and Development Research Centre, an official think tank.
Chinese mothers gave birth to 14.65 million babies in 2019, the lowest level since 1961.
China is not the only east Asian country suffering from declining births and an ageing population. Last year, South Korea’s population dropped for the first time on record. Russia’s population also shrank by 500,000 people in 2020, the largest decline in 15 years.
Rapidly ageing populations have put pressure on governments in Asia, as the potential for growth eases amid shrinking labour supply and the burden of caring for the elderly increases.
In theory, countries can offset the impact by improving labour productivity and capital investment, but that is “a gravity defying act,” said economists from French bank Natixis in a note in December.
“With fewer workers and an increased elderly population requiring more savings to sustain spending in retirement, greater pressure on public finances is expected,” the bank said. “As such, the more prepared an economy can be while still youthful, the more likely it is to age gracefully.
“With lower potential output, assuming all else is equal, the goal to rapidly grow GDP per capita or the standard of living, is more difficult. Some Asian economies, such as China and Thailand, will still be in the ‘middle income trap’ when they rapidly age.”