China's declining population: a ripening crisis in the making

This unprecedented growth of economy is owed mainly to cheap labor available in the country, this cheap labor being the result of China being the most populous country and the biggest market of the world number wise.

China has reaped many benefits of being the most populous state of the world and the changing trend is giving sleepless nights to the government of China. The fast-growing population of India is adding salt to the wound. India will soon surpass China as world’s biggest market and most populous state. The advantage China had for so many years at the number game is soon to perish.

China’s declining population will have serious ramifications at the economy and political front. Labor has started getting costlier and with that the production cost of the items manufactured in China is going up. Psychologically also China is losing the war, being no more the world number one is hurting badly the Chinese. The big population fetish about China meant that the world viewed China as the biggest market of the world and the decline in population should now have an impact on investors about how they view China. The Pyramid Structure of population with more young people working supporting the lesser old people at the top when China was growing faster economically is set to change or has already changed adding to financial problems of the government. During the economic boom China had the largest labor force and demographically the conditions were ideal for growth which has now changed because of lesser proportion of young people in the population of China.

People pick up children from a school in Beijing, China, April 6, 2021. Photo by Reuters/Thomas Peter.

The trend of China's population stagnating with signs of shrinkage is a clear indicative of declining population. The skewed sex ratio and decreasing birth rate is a point of concern. The problem that China’s government is facing is that their policies lie at the root of this declining population and are the sole reason for it. The declining trend which is the direct result of China’s one child policy is making its inroads in major policy reshaping and economic slowdown. The economic growth rate has already fallen to around 6 percent and with the increase labor rate the dynamics of economy is sure to be disturbed.

The average age of Chinese population is on the higher side which means that there is a smaller section of population which can be deemed productive and that chunk of population has to support a lot bigger chunk of old age Chinese people. Typically, in a common Chinese household there will be four grandparents, two parents and one child: the outcome and impact on economy from a population pyramid such as these is quite evident. The immediate fall out of the declining population on economy and country’s political stability will be meagre, however the long-term effects of this decreasing trend is set to push China’s economic progress in the back burner.

China getting into the middle income trap is still very much up in the air. It is not yet clear will China become a rich country; per capita income is still on the lower side. It is still a middle-income country. The educational level is not broad enough to support a jump from middle-income to high-income level. China doesn’t have better educated mass population and education is yet poor in the countryside and there are a huge number of people who just have middle school educational level. The government is investing in it but this could be too late too little for China. Scott Rozelle in his survey studies in rural setup about the educational levels concludes that the educational setup hasn't grown as it should have for China to be a developed country. China has till now ignored to invest heavily in the educational and technical sector and this is hurting China badly. In the modern world with all the sophistication and technological advancement around, China doesn't have enough numbers to continue and support its economic growth.

The one-child policy has hurt China’s interests in more than one way. The People's Liberation Army (PLA) is also at the receiving end of this policy. Even though the declining population does not affect PLA much as PLA has been on a program for decades to get smaller, more professional and higher tech. It (PLA) is more focused on high end weapon systems and have lower response time as it won’t be fighting a war involving a million soldiers and in that regard the population doesn’t matter much. The challenge however is that there is still the idea of PLA being a mass army where the pay is not very good, educational level is not very good, a typical recruit is a rural person with low school education, they have college graduates but not enough who can operate the modern weapon systems.

The decreasing population due to state policies poses a high risk for Chinese progress. It has already slowed down and have sounded alarm bells in the system. The skewed sex ratio is yet another problem which has led to increase in human trafficking and increase in crimes. China's worries are real and they are shifting from one-child policy to three-child policy, however the relief is yet very far off.

*Ian Johnson is a writer who lived in China for 20 years. He won a Pulitzer Prize for his coverage of the country.