China’s Population Decline and the Looming Economic Challenges

China has reported a second consecutive year of population decline in 2023, signaling a worrying trend with far-reaching consequences for the country’s economic future. The National Bureau of Statistics disclosed that the total number of people in China decreased by 2.75 million, reaching 1.409 billion in 2023. This decline is faster than in 2022, marking the first consecutive fall since 1961 during the Great Famine of the Mao Zedong era.

The population decline is attributed to a combination of factors, including a plunging birth rate and the aftermath of a wave of COVID-19 deaths. China experienced a significant nationwide surge in COVID-19 cases after strict screening and quarantine measures were lifted abruptly in December 2022.

The country’s birth rate has been on a downward trajectory for decades due to the one-child policy implemented from 1980 to 2015 and rapid urbanization. Similar to economic booms in Japan and South Korea, the migration of large populations from rural areas to cities has made raising children more financially challenging.

In 2023, additional factors such as record-high youth unemployment, falling wages for white-collar workers, and a crisis in the property sector further discouraged childbirth. More than two-thirds of household wealth in China is tied to the property market.

The declining population raises concerns about China’s economic growth potential, as fewer workers and consumers could strain the economy. Rising costs of elderly care and retirement benefits also pose challenges to indebted local governments.

According to United Nations estimates, India surpassed China as the world’s most populous nation in the previous year, fueling debates about the relocation of supply chains from China to other markets. This comes amid increasing geopolitical tensions between Beijing and Washington.

Long-term projections by UN experts suggest that China’s population could shrink by 109 million by 2050, more than triple their previous forecast in 2019. The retirement-age population (60 and over) is expected to surpass 400 million by 2035, exceeding the entire population of the United States, according to the Chinese Academy of Sciences, which warns of the pension system running out of funds by the same year.

In 2023, China’s birth rate hit a record low of 6.39 births per 1,000 people, down from 6.77 in 2022. Comparatively, Japan’s rate was 6.3 births per 1,000 people in 2022, and South Korea’s was 4.9. The death rate in China increased to 7.87 deaths per 1,000 people in 2023, up from 7.37 in 2022, marking the highest since 1974 during the Cultural Revolution.

As China grapples with these demographic challenges, the nation faces a critical juncture that will have significant implications for its economic landscape in the years to come.