Beijing has acknowledged that China’s population will face negative growth by 2025 for the first time. An article from China’s National Health Commission in August also said that more than 30 percent of the country’s people will be older than 60 around 2035.
As China’s official data shows, China’s population reached 1.412 billion at the end of 2021, up merely 480,000 yearly. In 2016 China’s net population added over 9 million more people. But six years later, it decreased by 95%.
Yi Fuxian, a senior scientist in obstetrics and gynecology at the University of Wisconsin-Madison, told Voice of America Mandarin that “as China’s economic miracle has been heavily based on its inexhaustible labor force, an inflection point in its population will inevitably mean an inflection point in its economic model.”[End intro]
Indeed, the population aging trend is influencing the economy. Last November, Financial Times reported that nappy producers have started prioritizing seniors over infants.
Data from Natixis, the French bank, showed that one in four Chinese people would be elderly in 30 years. At this time, it was one out of 10 in 2020.
People in the nappy field expect the adult market to surpass the infant market by 2025. This trend in China looks like in Japan a decade ago, when infant diapers started to be outsold by adults.
Unicharm, one of China’s top sellers of nappies and hygiene products, has changed its marketing activities. Unicharm was no longer investing in the Chinese baby nappy market as before.
Also, Chinese nappy companies have changed their strategy. A nappy factory in Hubei makes goods for the elderly as flagship products rather than baby nappies.
According to the seventh census, released in 2020, China’s workforce aged 16–59 was 880 million in 2020. It was a sharp drop of more than 40 million compared with 2010 figures, amounting to an annual decrease of about 4 million.
Vice Minister You Jun of China’s Ministry of Human Resources and Social Security predicted in March that the workforce is still declining, maybe by 35 million individuals over the following five years.
Zheng Bingwen from the Chinese Academy of Labor and Social Security said that China is expected to be a super-aged aging society by 2035.
Mark Williams, the chief Asia economist at Capital Economics, wrote on his company’s website about the effect of an aging population: “the most likely scenario is that slowing productivity growth and a shrinking workforce prevent China ever passing the U.S.”
Indeed, an aging population is a significant burden. It leads to two issues.
First, China’s workforce is dwindling, which is dragging on economic growth.
The annual decline in China’s working-age population sets higher labor costs than in previous years. According to the BBC, Chinese manufacturing labor expenses have doubled Vietnam’s already.
Furthermore, when China steps back, its competitors move forward.
The report “World Population Prospects 2022,” released by the United Nations in July, predicts that India will overtake China to become the world’s most populous country by 2023.
China’s population is predicted to fall to more than 1.3 billion by 2050. India will have 350 million more than China, reaching over 1.6 billion.
As a result, the resultant movement of some labor-intensive, low-margin manufacturing from China to labor-rich nations like Thailand, Vietnam, and India will risk China’s position as the world’s factory.
Second, as the economy shrinks because of labor shortages, health care costs are another impact of an aging population. China will divide its productive resources to provide health, medical and aged-care services by a smaller and smaller pot of taxes.
Regarding this issue, the BBC cited modeling by the Center of Policy Studies at Victoria University in Australia predicted that without changes to China’s pension system. Its pension spending will increase fivefold, from 4% to 20% of its Gross domestic product, between 2020 and 2100.
Besides, Sina cited Zheng Bingwen, saying he also analyzed the impact of population aging on the savings rate. He said China’s savings rate has been declining, dropping by about 7 or 8% since the international financial crisis in 2008.
While the savings rate has gradually decreased, household debt has risen at the same time. It is mainly in the three sectors: housing loans, car loans, and credit cards. Many international institutions predict that the debt rate of Chinese households will be very high.
So why does population aging take place in the world’s most populous country?
One is that Chinese couples don’t want to have a baby.
The Evergrande Research Institute launched a fertility intention survey on Weibo, a popular social media in China, twice in March 2018 and January 2019. 160,000 Chinese voted, and about half of those surveyed said they didn’t want children.
Accordingly, the number of births in China was over 15 million in 2018, declining by about 1 million in 2019, and continuing to decline to 3 million in 2020 with 12 million births registered.
Living under enormous social and economic pressure, such as the high cost of living, delayed marriages, and lack of social mobility, are reasons Chinese couples say they don’t want any children.
Financial Times commented that this is starting to remind us a little of Japan in 1989. A debt-fueled real estate bubble that is rapidly deflating. Stocks significantly underperform their offshore counterparts. And now, potentially, a population materially reducing in size.
And, crucially, faster than many think.
Might China become a second Japan? Nobody knows, but three factors of Japan’s aging society play out in China.