Demography May Be China’s Worst Enemy

Demography may not sound like a sexy science to those outside the field, but its numbers have a way of exposing the raw truth about governments and their populations. The Chinese Communist Party’s (CCP) authoritarian leadership depends heavily on creating and presenting its own economic narrative to the world. The linkage of that narrative to reality varies according to how well it supports the CCP’s goals. In 2000 when the United States granted China permanent, Most Favored Nation status, President Jiang Zemin cashed in the country’s “demographic dividend” early and used it as a tool to quickly build and modernize the economy. For several decades the CCP has exploited China’s large population of low-cost rural labor in its quest to capture global markets without concern for the long-term implications to the nation. It worked for while, as the country experienced double-digit economic growth, modernized its military, and arguably improved the country’s international image as a global power. President Xi Jinping continues the short-term, but eroding advantage it provided today.

The human cost to China, however, is likely to dramatically impact future generations. The population is aging fast with the percentage of seniors much greater than that found in other countries due to the CCP’s ill-conceived, 37-year long “One Child Policy.” Its hukou (household registration) system, which is essentially a social control tool to enforce restrictions on internal migration, has expanded the rural-urban economic gap during this period, making it one of the largest in the world. The Covid-19 virus may be the final blow to the country’s already fragile and failing, long-term economic future.

China lacks a strong social welfare system to care for its aging population. The cost of medical care and other requirements for its seniors will likely overwhelm the country within the coming decade. Add to that a smaller number in the younger age group who must take on the physical burden of the older generation, as well as provide additional economic support for it. Without sufficient cheap labor and a lack of a growing consumer base the national economy faces a bleak future.

To quell increasing social unrest the CCP promised in 2013 to begin reforming the immense economic and educational inequalities in the hukou system that effectively created the world’s largest underclass. That work is left incomplete. China has a critical need for educated workers to fill jobs in its high-tech economy. Yet there is no end in sight for the hukou system. The rural poor continue to be left out of potential solution scenarios. It festers as a breeding ground for future social instability as those originally from rural areas earn on average only 50% of urban-born worker salaries. In 2018 many major urban areas began a program of forcing rural-born workers out of the cities claiming they were a public safety hazard, restricting their business permits, and closing the local schools their children attended as a response to possible unrest.

Full integration of the poor, rural working class in urban areas is unlikely under the current regime of President Xi Jingping. This is further reinforced at the local level in the poorer provinces as only municipal governments are permitted to sell farmland for commercial purposes. Local officials are allowed to retain the sale money as revenue for their own use. Farmers typically don’t own their own homes, or the farmland in China, as it is “collectively owned.” They can’t sell their family homes for a profit as can urbanites. Municipal governments are unlikely to relinquish this regular revenue source and Beijing is unlikely to press the issue as it would have to replace the local funding source.

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The gap between rich and poor, urbanites and nongmingren, and the educated and under-educated classes, has resulted in a growing economic and social chasm. The proportion of total wealth held by the richest 1% in China has increased from holding just over 15% in 1995 to 30% today. When examining historic demographic data from other nations there is one comparison, in particular, worth noting. Oligarchic Russia saw the doubling of wealth among the top 1% over the length of time to 43% of the total. China wealthiest 10% today hold 67% of the nation’s total wealth. If history repeats itself in China in the coming decade it doesn’t bode well for the CCP.

DARIA NOVAK served in the United States State Department during the Reagan Administration, and currently is on the Board of the American Analysis of News and Media Inc., which publishes usagovpolicy.com and the New York Analysis of Policy and Government. Each Friday, she presents key updates on China.

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.