Zehner: The Gray Dynasty

Aging is China’s biggest concern.

by Callum Zehner | 4/2/19 2:00am

According to Western news media, China presently faces a large number of problems. News stories are constantly awash with reports concerning the pollution in Chinese cities, political and religious repression and government corruption, among more. But there is one issue in particular that will seriously threaten China’s success within the next thirty years: Demographics. Even as a nation of 1.3 billion people, China will soon lack a sufficient number of citizens to support its economy. The country is aging quickly, and the repercussions of this should be a grave concern for Beijing.

The decline in population growth is not unique to China. Generally, as economies develop, families have fewer children and people live longer, curtailing further population expansion. Japan comes to mind as an example. But China’s situation can be explained in part by one of history’s most egregious attempts at social engineering — the infamous one-child policy. 

Enacted in 1979 to dam population growth, the policy kept the country’s fertility rate artificially low for the better part of 40 years. As a result, current estimates suggest that China’s fertility rate — the average number of children born per woman — is between 1.18 and 1.6, far below the replacement level fertility rate of 2.1. Although the two-child policy replaced the one-child policy in 2016, fertility figures show no sign of improving. After the two-child policy’s introduction, there was only a brief uptick in the fertility rate before it continued its downward trend. This is because changing policy does not change people’s mindsets about having children. And doubling the amount of money spent on child-rearing, due to additional housing and education costs, would be too expensive for some parents. 

The Chinese population is expected to begin shrinking by around 2029, resulting in less domestic consumption and output. A shrinking workforce will also expedite the decline of China’s competitiveness in manufacturing, with a smaller labor pool leading to higher wages for employees and a decline in the sector’s profitability. As a result, manufacturers in China may shift operations to more profitable locations, such as Vietnam and Mexico.

By 2050, China will have 330 million people over the age of 65, leaving fewer younger people to provide for an increasing elderly population. In 2013, only three percent of people had a commercial pension. The vast majority of seniors have to rely on support from either their families or the state. Thus, many working-age Chinese are tasked with caring for four grandparents, two parents and however many children they themselves may have. The government too will struggle to support seniors, with an expected state pensions deficit of $130 billion by 2020.

Almost all developed Western nations have declining birth-rates and aging populations. But some countries, like the United States, have largely alleviated the issue through immigration. Immigration is by far the simplest way to remedy, if not cure, China’s population woes, providing a regular source of working-age people capable of filling those gaps left by the native Chinese population. It has historically been controversial to take in foreigners — the practice has been deliberately non-existent. Beijing possibly sees the intake of many foreign workers as a last resort. This is a missed opportunity.

Make no mistake: China’s economy is still growing rapidly and may well continue to do so for the next decade or so. But in the next few decades, the ghosts of the one-child policy will come back to haunt China, and social and economic upheaval will result. With the potential for hundreds of millions of pensioners to require support, and an inadequate workforce to provide that support, China’s aging population is a problem that requires immediate action.