Are China’s glory days coming to an end?

 Are China’s glory days coming to an end?

China’s rise as an economic powerhouse is arguably the most spectacular story of the early 21st century. But are China’s glory days coming to an end?

China faces a demographic crisis that threatens its economic and military supremacy. The culprit? Low birth rates and an ageing population — a two edge sword that carry dire consequences.

These consequences include an insufficient workforce to sustain its manufacturing sector, a sector that constitutes 38% of its economy. A diminishing base of customers to sustain consumer demand. And, in defense, a scarcity of young able people to sustain the fighting power of its armed forces.

China’s demographic crisis can be traced to the One-Child Policy imposed in 1980 by Chairman Deng Xiaoping. The policy was imposed following the tremendous baby boom which saw China’s population grow from 540 million in 1949 to 969 million in 1980. Back then China was an agricultural economy whose output was not enough to support its rapidly growing dependents. Without population control, a hunger, housing, and healthcare crisis was sure to occur.

China’s Communist Party restricted couples to a single offspring and imposed steep fines for violators. And should parents fail to pay the fine, the second child would not be registered in the national household system. This meant the child would not legally exist and would be denied access to social services like healthcare and education. Civil servants and employees of government-affiliated organizations risked losing their jobs if they were found to have more than one child. The policy pushed women who were accidentally impregnated to get an abortion.

The One China Policy succeeded in retarding population growth. In fact, it is largely credited for China’s meteoric rise in per capita income in the decades that followed. But it created a culture among young Chinese of having small families, a culture that persists today.

For those who are unaware, there need to be at least 2.1 births per woman in order to maintain a population at constant levels. Since the enforcement of the One-Child Policy, birthrates in China have steadily declined, bottoming out at 1.3 per woman in 2020. In other words, the Chinese population is not being replaced and is on the path to decline. Meanwhile, the segment of those of retirement age is expanding exponentially.

Alarmed, Chinese policy makers officially ended the One Child on Jan. 1, 2016 and replaced it with a law allowing married couples to have a second child. Mysteriously, the words “family planning” disappeared from government’s lexicon.

China’s 2020 census confirmed that Chinese mothers gave birth to just 12 million babies in 2020, down from 14.65 million in 2019. With that, Beijing announced in May 2021 that it would allow couples to have three children.

But the ethos of having small families had already been deeply ingrained in Chinese culture. A survey conducted by China’s National Bureau of Statistics revealed that Chinese women, in general, were only willing to have 1.8 children during their lifetime. A lack of affordable childcare, rising living costs, and grueling work hours has been cited as some of the reasons making many young Chinese think twice about having any children, let alone more than one.

As of the end of 2021, China’s population stood at 1.41 billion people. The Shanghai Academy of Social Sciences predicts an annual average decline of 1.1% after 2021. This will pull China’s population down to 587 million by the end of this century, less than half of what it is today. The assumptions behind this prediction is that China’s fertility rate will slip from 1.15 to 1.1 between now and 2030, and remain there until 2100.

Exacerbating matters is gender imbalance. The One-Child Policy led to gender-selective abortions or infanticide targeting girls. This was due to a centuries-old social preference for boys. As a result, there are 37 million more men than women as of last year. Among the menfolk are millions of “bare branches” or unpartnered men without children who belong to the marginalized sector. Studies show that an inordinate number of bare branches in a community leads criminality, gambling, and prostitution. All these contribute to the collapse of Chinese culture and traditions.

The silver generation, or those above 60 years old, have become China’s fastest growing demographic. As of 2019, the elderly comprised 18.1% of the population. This number is seen to increase to 25% by 2030 and 35% by 2050.

A country’s Demographic Dependence Ratio measures the relationship between those aged zero to 14 and over 65 against the population aged 15 to 64, or those of working age. This indicator reveals the proportion of people of working age against those who are dependents. As of 2021, China had a dependence ratio of 42.87%. This amount is forecast to increase to well over 90% by 2050. In other words, for every 10 Chinese who are too young or too old to work and contribute to the economy, there will only be one person in the workforce working to sustain them.

One can imagine the social burden on government, what with pension and healthcare costs to contend. As it stands, China’s 7 trillion yuan pension fund is seen to be depleted by 2035. There will be a deficit in the pension system after that since benefits (disbursements) outpace contributions.

How can China overcome its demographic crisis? It can lean on technology to wean itself from dependence on manual labor. But this can only go so far and could never replace the might of a strong and plentiful workforce. It can also open its borders to immigration. But with a repressive communist government, China will be hard-pressed to attract young talent who prefer free, democratic countries to live in.

The only other way China can circumvent its demographic crisis is through annexation. This is another reason why the invasion of Taiwan is important to Beijing. But this is a topic for another piece. Suffice it to say that if China is unable to replace its workforce, its demise as an economic and military power is imminent.

Andrew J. Masigan is an economist