ISSN 2330-717X

Demographic Changes Ahead For Beijing: Risks And Opportunities – Analysis

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By Bart Broer*

Introduction

In January this year, the Chinese Academy of Social Sciences, a widely reputed think tank close to the executive, published a landmark report disclosing staggering projections for China’s short- and long-term population development. In a nutshell, the report sounded the alarm over the country’s ageing population, whose societal burden will have to be borne by a shrinking workforce. This is largely induced by two developments: first, a dramatic rise in life expectancy, second, a structurally low fertility rate. 

The findings were confirmed by a report from China’s National Bureau of Statistics, which stated that China’s fertility rate had stabilized at around 1.6 children per woman – significantly below the threshold of 2.1 children per woman required to steer clear of negative population growth (not taking into account migratory factors). Even though China’s fertility rate has remained stable since the late 1990s at around 1.5 children per woman, the societal impact of this low number has been amplified over the years due to the country’s dramatic increase in life expectancy (43.7 years in 1960, 69.2 in 1990, and 76.4 in 2017 and projected to be 81.9 in 2040, surpassing that of the US). A sudden increase in fertility rate is widely seen as improbable due to Beijing’s decades-long imposition of birth control measures as well as the spectacular rise in living standards. Accordingly, these demographic forecasts may pose severe societal, economic and political challenges for the Xi regime.

The facts

A considerable degree of controversy persists over the accuracy of these two closely interlinked reports. Whereas the United Nations, the World Bank and the U.S. Central Intelligence Agency have all documented a 2017 Chinese fertility rate of around 1.6, a number of leading academics and demographers have concluded otherwise.[1]The suspicion with which they regard official Chinese demographic statistics may be attributed to longstanding inconsistencies between provincial and national population records – ever since 2000, national statistics have amounted to more than the sum of what provincial authorities reported.[2]Since the institution of the family planning policy in the early 1970s, including the one- and two-child policies enforced between 1979 and 2015, abortion, sterilization and the use of contraception were not uncommon. Many women who decided to bear a child in violation of the respective legislation feared being subjected to heavy fines, in turn resorting to “widespread concealment and underreporting”.[3]

In 2009, the National Bureau of Statistics, in what can be interpreted as recognition of this underreporting, adjusted the 2000 fertility rate from 1.2 to 1.4 – relatively close to the 1.6 rate it reported for the year 2016.[4] Some academics have commented that this retroactive adjustment predominantly serves to provide credible support for similarly inflated government statistics, such as the country’s gross domestic product and annual economic growth. Based on his own analyses, Yi Fuxian from the University of Wisconsin-Madison estimates the average fertility rate in the period 2010-2016 to be 1.18, with the average fertility rate in China’s three most north-eastern provinces having plummeted to a mere 0.56 in 2015, representing an all-time low.[5]Such a low fertility rate would be lower than rates in the Republic of Korea, Japan, the U.S. and India. It hence remains difficult to ascertain the historical trajectory of the fertility rate in China over the past century. The consensus within the demographic community lies around a 2016 fertility rate within the 1.5-1.6 range.[6] 

As opposed to the relative difficulty in constructing an accurate image of China’s fertility rate, little disagreement persists over the nation’s rapidly ageing population, largely incurred by the dramatic rise in life expectancy over the past 50 years. Even though critics have questioned the data collection methods of the Chinese authorities, which have an alleged tendency to collect disproportionally high amounts of information from urban areas to the detriment of rural data,[7] demographic consensus considers China’s life expectancy in 2015 to be around 78 years for women and 74 for men. This marks a dramatic addition of 30 years of life expectancy compared to official 1950 statistics.

A structurally low fertility rate combined with a swiftly increasing life expectancy is typically described by demographers as a Molotov cocktail, inevitably leading to a rapidly ageing population on the short run, as well as a reduced labour pool on the medium run. This may be exacerbated by a decreasing population size, which some demographers have predicted could occur in a mere five years’ time.[8] The economic crisis in Japan during the 1990s was, similarly, predominantly triggered by the exceptionally low fertility rate in conjunction with an exploding elderly population, which in turn posed an increasingly heavy financial burden on the welfare state. 

The factors

Before moving to analyse some of the domestic implications of these developments, it is necessary to understand the variables that have led China into this demographic predicament. As to the role of the Chinese authorities in shaping today’s demographic situation, one may ostensibly point to the role of family planning policies.

The effectiveness of the respective one- and two-child policies, however, remains heavily disputed, as the lowering of the fertility rate commenced decades before the policies were actually instituted. Right after their institution in the late 70s, China’s total fertility rate in fact stabilized after 15 years of continued decrease.[9] Many scholars point out that the effects of the restrictive policy, which was largely inspired by the flawed idea that stealth is a more effective means to control the population size than genuine economic development, will not be evident for decades to come.[10] As Wang et al. put it, “a decade and more of research by scholars has shown consistently that fertility remains well below the replacement level, and has revealed that the one-child policy is not a main driver of China’s low fertility.”[11] Demographic research has convincingly shown that socio-economic development, as opposed to population control by stealth, is the most powerful predictor of fertility rates. The majority of young women in China now attend tertiary education; has moved to urban areas; and increasingly prioritizes career development and financial stability over reproduction. China has lifted hundreds of millions of people into the middle class – a low fertility rate is only a natural consequence thereof.

The implications

As illustrated by Japan since the 90s, a sustained low fertility rate in conjunction with a continued rise in life expectancy generates an ageing society and induces negative population growth. China’s median age is set to rise from 32.7 in 2005 to 43.0 in 2030 (well above the U.S. at 39.8 and on par with France at 43.3).[12] The share of the population aged 60 and older is set to increase from 8.52% in 1990 to 25.1% in 2030. In December 2012, unprecedented in modern history, China’s working-age population shrank by 3.5 million, sounding alarm bells in Beijing.[13]In terms of the country’s impending population decrease, although estimates diverge, the current size stands at 1.42 billion, with a ten-year all-time high of 1.44 billion expected between 2024 and 2034, after which the population is forecast to decrease exponentially, dwindling past 1.36 billion by 2050.

These developments will have far-reaching societal implications, most crucially of which, they would create a gradual labour shortage. This would in turn induce higher wages, as a result of which the manufacturing sector, a backbone of the Chinese economy, may be inclined to move production to less costly nations. In fact, this process has already started, with Vietnam being a key destination of major manufacturing companies including Apple and leading furniture maker Man Wah Holdings. LG, Samsung and Intel have all recently made considerable land acquisitions in Myanmar, Vietnam and Indonesia. 

Artificial intelligence, although responsible for the creation of a plethora of jobs in the technology and robotics sector, is also likely to cut available employment opportunities on the long run. Since 2013, China has installed more robots than any other country in the world. Although the affects of employment automation on the quantity of available jobs are hard to ascertain, studies have suggested that drops in employment as a result of automation are borne predominantly by emerging states – including China.[14] As the automation of the industrial and manufacturing sectors in particular continues – sectors jointly accounting for 44% of China’s GDP – further job losses are to be expected in the future, including employment replacement to the IT and technology sectors. Hence, a stable or even negative population growth may in fact neutralize the corrosive impact of robotisation on employment, reducing the need for skilled immigration – provided that younger generations are employed in those domains where employment opportunities will continue to be widespread. 

China’s millennial generation is increasingly career-oriented. Against the backdrop of skyrocketing costs for accommodation and education, they are prioritizing the attainment of a stable income over children. This will have major repercussions on the extent to which the younger generations will be able to follow family conventions. Those aged 65 and above will no longer be able to fully count on their descendants for the requisite family care after retirement. Elderly care, having been an essential virtue in Chinese society ever since the writings of Confucius, is likely to come under increased pressure. Similarly, the impending ‘revolution in family structure’, as explained by Nicholas Eberstadt of the Hoover Institution,[15] implies a dramatic change in the way individuals establish professional and social connections, and in the way they maintain their family connections. The infamous guanxi networks, composed of a series of ‘fellow clansmen’ providing individuals with professional, financial and human security, “have been integral to getting business done at the micro level, and at the macro level have improved national economic performance by reducing transaction costs and risk.”[16] The plummeting fertility rate induces a shrinking young population (defined 0-29 years of age), which will, upon entering the job market, experience great difficulty in establishing professional circles due to the relative dilution of their available network.

China may also move towards easing its migration policies to attract foreign skills and talent. By the same token, as China today still lacks a properly functioning welfare system, retired and elderly individuals continue to rely on their descendants for financial and personal support – creating yet another incentive for young women to postpone reproduction, or to abandon the idea in its entirety. Moreover, the legitimacy of the Communist Party could increasingly be called into question, as many Chinese will progressively perceive the restrictive reproductive policies, which have after 35 years of uninterrupted enforcement become intrinsically affiliated with the CCP, as a faux pas. Reinvigorated calls for a properly functioning social welfare system can, similarly, be expected.

The Party will have to devise fitting responses to these consequential threats to its own legitimacy. Proposals formulated by demographers and economists alike[17] include to raise the age of retirement; to bolster investments in the female workforce; to liberalize migration procedures; to invest in public information campaigns against the current negative discourse surrounding the bearing of female babies; and to invest in labour efficiency, in particular in rural areas in order to allow for an additional share of the workforce to resort to urban areas.

The relevance for Europe

There are, ostensibly, international ramifications of China’s current and impending demographic development. Europe is home to a well-developed health care industry, hosting some of the world’s health tech giants. The ageing of China’s population will see the demand for high-quality health goods and services catapult, providing opportunities for Europe’s private health care sector. Furthermore, to fill the looming gap between labour demand and supply, Beijing will endeavour to lure qualified European talent to China – making the risk of a European brain drain more serious. Third, negative population growth will impede the growth of the Chinese economy. The EU, having China as its second largest trading partner, ought to be prepared for such an economic slowdown and would be most wise diversifying its trade and investment portfolio within Asia.

India is set to overtake China as the world’s most populous country by 2024, with a period of uninterrupted population growth projected until 2064.[18] Delhi will not – for now – be faced with some of the aforementioned societal challenges Beijing must confront. The game for regional hegemony in Asia will be fought between India and China – with the former, although having entered the fray last, ideologically considerably more closely positioned to the EU than the latter. In the field of connectivity standards, support for multilateral institutions, the regulation of international trade and investment flows, and maritime security, India and the EU have many communalities – including e.g. their criticism of China’s connectivity engagement and its conduct in the South China Sea. All in all, a balanced, comprehensive outreach to both India and China would serve Europe well. 

Notwithstanding, China’s rapidly transformative demographic environment also presents opportunities for Europe. Europe’s private sector harbours significant knowledge on, and experience in, countering and dealing with ageing-induced diseases. A 2014 factsheet[19] of the European Commission’s DG for Research and Innovation does not only list a number of policy proposals to ensure sustainable economic growth against the backdrop of an ageing European population and a sub-replacement fertility rate; it also references what it considers to be Europe’s privileged position in capitalizing on these demographic changes: Europe’s top-tier healthcare provision, its social welfare systems, pension mobility schemes, and e-health, to name a few. A paper titled ‘The Silver Economy’, commissioned by the European Commission earlier this year,[20] identified Europe’s strong regulatory framework as an asset: promoting the active participation of elderly in the workforce, investing in the digital provision of health care, and actively supporting healthy aging, are measures which can be taken at either the European or national level to mobilize additional private capital for healthy aging purposes, reinvigorating business potential in the health care sector.

*About the author: Bart Broer, Research Fellow, EU-Asia Centre

Source: This article was published by the EU-Asia Center


[1]E.g. Yi Fuxian, University of Wisconsin-Madison

[2]Data Uncertainties in China’s Population. Quanbao Jiang, Xiaomin Li & Jesús J. Sánchez-Barricarte

[3]Jiang, Quanbao, Xiaomin Li, and Jesús J. Sánchez-Barricarte. “Data Uncertainties in China’s Population.” Asian Social Science11.13 (2015): 200; Shi, Yaojiang, and John James Kennedy. “Delayed registration and identifying the “missing girls” in China.” The China Quarterly228 (2016): 1018-1038.

[4]See 2, supra

[5]https://www.scmp.com/comment/insight-opinion/asia/article/2180421/worse-japan-how-chinas-looming-demographic-crisis-will

[6]See 2, supra. 

[7]Shi, Yaojiang & Kennedy, supra

[8]Gapminder platform.

[9]https://www.stlouisfed.org/on-the-economy/2016/october/china-one-child-policy-effect

[10]https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5944611/

[11]Retherford et al. 2005; Guo and Chen 2007; Cai 2008; morgan, Guo, and Hayford 2009); also http://dragonreport.com/Dragon_Report/Challenges_files/Wang_pp115-129.pdf.

[12]All data in this paragraph have been retrieved from the Gapminder platform.

[13]https://www.businessinsider.com/chinas-working-age-population-peaked-2016-4?international=true&r=US&IR=T

[14]http://www.bollettinoadapt.it/wp-content/uploads/2018/11/wcms_648063.pdf

[15]https://www.hoover.org/research/chinas-demographic-prospects-2040-opportunities-constraints-potential-policy-responses

[16]Idem.

[17]For an excellent overview of proposed measures, please refer to the following HarvardWorking Paper https://cdn1.sph.harvard.edu/wp-content/uploads/sites/1288/2013/10/PGDA_WP_53.pdf

[18]Retrieved from www.gapminder.org.

[19]https://ec.europa.eu/research/social-sciences/pdf/policy_reviews/kina26426enc.pdf

[20]https://ec.europa.eu/digital-single-market/en/news/silver-economy-study-how-stimulate-economy-hundreds-millions-euros-year



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EU-Asia Centre

EU-Asia Centre

The EU-Asia Centre aims to fill a void and establish itself as the leading, Brussels-based research policy think tank on EU-Asia relations, covering developments in Asia and relations between the EU and Asia.

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