The Asian giant's birth rate hit a record low in 2021, falling for a fifth consecutive year
China looks set to become the first country to get old before it gets rich.
Its declining birth rate looks almost impossible to reverse, a trajectory with profound implications for its economic and social prospects. The Chinese government is well aware of the problem and the dangers. Unfortunately, however, none of the responses looks like they will work.
Japan too must be alert to the repercussions of China’s aging. This country’s experience with a graying population may provide some ways to work with its neighbor and ease the transition to a grayer society.
According to census data released earlier this week, China’s birth rate fell for a fifth consecutive year to hit a record low in 2021. There were just 10.62 million births last year, according to China’s National Bureau of Statistics, an 11.6% drop from 2020.
While that is an improvement over the 18% fall from 2019 to 2020, it is still the lowest level since the founding of Communist China in 1949. Births outpaced deaths — barely — allowing the total population to increase by 480,000 to 1.4126 billion people. The country’s natural growth rate has plunged to 0.034%; it was only lower during the Great Leap Forward, when tens of millions of people died as a result of Mao’s disastrous economic policies.
Just 43% of the births were second children, a fall from 50% in 2017. Since a country needs a fertility rate (the average number of births per mother) of 2.1 to maintain the size of its population, China’s rate of 1.3 in 2020 leads many demographers to believe the that China’s total population may have peaked.
Even more ominous is the changing composition of the population. The share of working-age people under 60 has fallen from 70.1% a decade ago to 63.3% in 2020. Those aged 65 and older now constitute 13.5% of the total, up from 8.9%. The government predicts a loss of 35 million workers over the next five years and the share of working-age people could reach half the population by 2050.
This evolution will have powerful consequences. Wages will have to go up as the labor pool shrinks, payments to pension plans will decline and tax revenues will go down as demand for services rises. That last shift will be especially challenging. China today only spends about 7% of GDP on social welfare, substantially below the global average as calculated by the International Labor Organization, which is 12.8%. Even Brazil spends 17% of GDP on social welfare. Worse, it is estimated that the main pension fund for city dwellers could run out by 2035. Some experts fear social instability in a slowing economy.
Economists warn that China’s plan to become “a rich and powerful country” by 2049, the 100th anniversary of the founding of the People’s Republic of China, is imperiled. The International Monetary Fund has declared that China’s economy is “unbalanced and momentum is slowing,” and its shrinking workforce, declining productivity, the U.S.-China trade war and its decoupling from the international economy are all long-term threats to growth. The world must be ready for this adjustment in Chinese prospects, which has economic and military implications.
The reasons for the changing demographic structure are well known. Most fundamentally, as China develops, its citizens have better lives and better health care, allowing them to live longer. Families, and women in particular, are less inclined to have children. There are complaints about the costs of education — a big concern in a hypercompetitive child-rearing environment — and housing, the disproportionate burden born by women within the household, as well as fears that women lose opportunities for advancement when they take maternity leave.
These issues prompted the government in 2016 to lift the “one-child policy,” in force since 1980, and then last summer to allow families to have three children. The continuing decline in the birth rate shows that those moves had no impact. The recent crackdown on private education and the attempt to slow the rise in housing prices aim to ease the burden on families. More will be done. Housing subsidies, more generous maternity leave policies, increases in child care centers and changes in income tax policies are being debated or attempted in pilot programs.
Three other changes are critical. The first is a redistribution of family responsibilities so that the mother’s load is lightened. Both parents need to support the household. This should go hand in hand with workplace changes to better accommodate working mothers. A third step is last year’s decision to raise the retirement age, a move that is politically charged.
Still, most demographers believe these trajectories are nearly impossible to alter. Younger Chinese have ideas about “the good life” and having more children is not part of that vision.
Making a virtue of necessity, China’s government last month unveiled a national plan to grow the country’s robotics industry and upgrade equipment and processes in the manufacturing sector. Automation, powered by artificial intelligence, is intended to help address the country’s productivity shortcomings and mounting demographic woes. It won’t address the revenue issues, neither taxes nor pension payments.
China’s trajectory follows that of Japan. Currently, the pace of aging in China will overtake that in Japan in 2025; the share of the elderly in the total population will close in on that of Japan a decade later. The two countries have several bilateral forums in which demographics are discussed. They should do more to share their experiences addressing this transition. The potential range of conversations is vast, including national and local governments, businesses and civil society groups. South Korea is also experiencing the demographic trend and could join the discussions.
Aging has been part of the agenda at the trilateral summit. The urgency of this issue should demand more attention and spur more action.
The Japan Times Editorial Board