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.
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