China’s Shrinking Population

China is experiencing its largest population decline in more than sixty years. There is no turnabout in its public policy that can change the direction of the expected net decline, despite people living longer and having an improved health care system over the one that existed during the Great Leap Forward famine in the 1959-61 period. During those years demographers estimate China lost 3%-7% of its entire population. During the last 30 years, average life expectancy in China increased by 10 years. Yet the “replacement level,” unlike its economic expansion, has not kept up with the number needed to ensure the country can continue on its modernization program. The result of the failed One Child Policy will have a lasting impact for generations. China is in a desperate predicament and, as a result, is a dangerous nation-state that could destabilize the international world order.

For President Xi Jinping it means the Chinese Communist Party (CCP) will likely encounter potential economic destabilization and domestic political challenges that may be hard to surmount. At the same time, Xi must personally work to ensure his legacy is viewed positively in Chinese history books. In the coming 75 years China could lose more than 45% of its population. By the year 2100 China’s entire population could shrink to 649 million. In contrast, in 2015, 649 million accounted for just the number of active Internet users in the country! Today consumption levels, health indicators, and educational attainment levels offer the basis for a sober assessment of China’s future.

China is feeling the demographic pinch at the same time as its hyper-economic growth is plateauing. Recent data, for example, indicate that China is no longer a leading country in the semiconductor value chain. The United States, South Korea, Japan, and Taiwan are the leaders in research and development in the field. Japan, South Korea, and Taiwan lead in silicon wafer production and processing, while the Netherlands, Japan and the United States lead in semiconductor equipment manufacturing. China no longer makes any of the hi tech lists.

China’s “three-D’s,” (debt, deflation, and demography) are interacting to exacerbate government planning challenges. The CCP faces a shrinking and aging labor force in the country. That translates to fewer buyers for the domestic real estate market. According to Wang Fang, writing in the Wilson Quarterly recently, “Local governments used to rely heavily on land sale and real estate development for its revenues and to pay off debts.” The cooling real estate market results in reduced revenue for local governments while the country is simultaneously experiencing increased costs for health care and pension payouts.

“Concerns for old age support, without an adequate and equitable social safety net, could further dampen consumer spending. Unlike debt and deflation, for which the government has policy tools at its disposal, there has been no effective measures to turn the demographic tide,” says Wang.

According to Beijing’s official college enrollment numbers, the total student body in 2024 increased six-fold since 2015. While it is impressive that the percentage of college graduates increased from 3% in 1990 to more than 50% in 2020, the falling population data indicates that there will be openings in college for 100% of China’s entire current population in the coming decades. The equivalent would be if the United States had its entire population of over 325 million enrolled in college!

The era of 200-million Chinese women having only one child will haunt the country for more than the next 100 years. The 40-year-long, “one-child generation” will soon face caring for the country’s aged along with their associated increased medical needs. Xi’s legitimacy, and his legacy, will be determined by how he addresses the demographic nightmare created by the Chinese Communist Party.

Social spending on benefits has more than doubled from 6.1% in 2007 to 13% in 2020, outpacing even increases in China’s defense spending. The per person working population tax burden will increase dramatically in the coming decades. Within 25 years, estimates indicate that over 30% of China’s GDP will be needed to support social benefit programs. That amount is equivalent to China’s entire GDP today.

Xi Jinping will need to take drastic action to ensure political and economic stability in the country in the coming years. At present he appears to be using increases in crackdowns on freedom and dissent to quell unrest. There is another option. It could open a window in which China is forced to move closer to the West to ensures its survival. While the country’s future is yet to be written, the quantitative data are pretty clear about what China will look like in the coming years.

Daria Novak served in the U.S. State Dept.

Photo: Pixabay

Quick Analysis

Ukraine’s Frozen Conflict

As we approach winter in the northern hemisphere, the war in Ukraine is beginning to resemble a “frozen conflict” from many perspectives. Ukrainian President Volodymyr Zelensky recently told the media he hopes the war will end faster once President-elect Trump takes over in January. Opinions in Moscow, however, differ from that of the Ukrainian leader. Russian President Vladimir Putin argues that the North Atlantic Treaty Organization (NATO) needs to exclude Ukraine from joining in “exchange” for peace. If it does not, he says, then no end to the war is in sight. So far there is no Christmas solution. Several NATO countries, according to Vladimir Socor of the Jamestown Foundation, are tentatively considering “coalitions-of-the-willing” to provide security for Ukraine outside of the formal NATO framework. There is, however, no collective mechanism today under which such an arrangement is viable. According to the NATO Charter, while Ukraine is a NATO partner country, it may not join as a full member since it has not fulfilled the requirements for membership. That has not stopped NATO and allies from continuing “to provide Ukraine with unprecedented levels of support, helping to uphold its fundamental right to self-defence,” according to the organization. Socor says that keeping Ukraine out of NATO will not advance peace with Russia. Waiting for a peace settlement, he suggests, would only serve to encourage Moscow to continue the war indefinitely. Although the Biden Administration officially withdrew its support for Ukrainian membership in 2021, NATO maintains an “open door” policy toward membership-seeking countries. The current White House position led the way for European states to oppose Ukraine’s membership saying that a decision should be delayed until “conditions are met.” Biden pushed for changing “open door” to a “bridge” metaphor. It is not intended as an across-the-board NATO policy and has been implemented in the past on a case-by-case basis, says Socor. “The alliance’s open-door policy was not fully insulated from Russia’s non-statutory blocking power, and NATO-aspirant countries’ path toward membership was not always irreversible.” Russia has successfully blocked states like Georgia from joining, first in 2008 and again after the war in Ukraine began in 2014. Russia recognizes the value add of Ukraine to NATO is enormous and that Kyiv has a better case than some other nations. Putin’s invasion was, in part, intended to foreclose that option. By 2021, Moscow was pushing hard to maximize its war objectives, which included further annexations of Ukrainian territory. A main goal for Putin was, and is, to ensure there is no Ukraine left to join NATO. As President-elect Trump prepares to assume office in January, he is faced with the historical challenges presented by the war. Post-conflict security guarantees were the center of several proposals made during the 2023 military stalemate. The incoming Trump Administration has yet to outline how it intends to handle the Russia-Ukraine war. Analysts in Washington believe that the new Administration will expect its European allies to guarantee the majority of Ukraine’s security needs. As we approach 2025, several European nations have acknowledged that they do not view Ukraine as eligible for NATO membership as it would draw the organization into the middle of the conflict. Others want to wait until the war is over or pending a “peace” settlement before considering Ukrainian membership. Socor reports that some “influential voices” are suggesting that “Kyiv should join NATO after “freezing” the war along a stable armistice line, de facto accepting Ukraine’s partition, with NATO security guarantees applying de jure to the government-controlled territory only.” This would mean starting accession talks soon with the actual talks to commence only after a ceasefire is in place. Trump arrives in Washington at a time when Putin’s hybrid strategies of war in Ukraine have eviscerated commonly-held differences between war and peace. “Absent a political consensus in NATO over Ukrainian membership, certain European allies, including France’s President Emmanuel Macron, are holding informal consultations about post-conflict security guarantees to Kyiv by NATO members outside of NATO’s framework,” according to the Jamestown Foundation. The Biden Administration downplayed the discussions on possible forms of military assistance and defense industry cooperation by sending only an Assistant Secretary of State. For a European peace to hold the Trump Administration would need to formally extend the United States’ nuclear deterrence to Ukraine. Options under discussion in Europe include a “coalition of the resolute” to deploy forces to Ukraine as part of a possible armistice package, deterring further Russian attacks, says Secor. European officials are also debating, without any agreement, whether its military forces could perform non-combat logistical roles to free Ukrainian forces to fight. None of the possible courses of action has moved forward as all eyes are waiting on the incoming Trump Administration for clues about its intended level of support for a NATO framework and other non-NATO proposals. Daria Novak served in the U.S. State Dept.