China’s population peak a challenge for world economy

China this week revealed it had reached a significant milestone: its population now appears to be shrinking.

On Tuesday, its National Bureau of Statistics announced that in 2022 nearly a million more people died there than were born, the first time the population has declined since the terrible famines of Mao Zedong’s Great Leap Forward in the early 1960s.

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Not that long ago, the news would have been greeted with delight. For decades, the Chinese Communist Party ruthlessly controlled population growth through its much-hated one-child policy. Imposed in 1980, it led to forced sterilisations, sex-selective abortions and a significant imbalance of women to men but was ultimately successful in dropping the nation’s fertility rate below two children per woman by the mid-1990s.

The unintended result, though, has been a population that is growing older, faster. It means there are more people who will soon need pensions and health care and fewer young people coming along to pay for it. In neighbouring Japan, the population decline it has experienced every year since 2010 has resulted in economic stagnation. As China’s population ages, and demographers believe it will continue to do so, it will have serious consequences not only for the domestic economy but for all the nations that depend on it so heavily, not least Australia.

While the pandemic is certainly to blame for the recent sudden down tick in births, it has only exacerbated a long-term trend, which was likely driven not only by government policy but changing values.

In 2016, the Chinese government pivoted, dropping the one-child policy. In 2021, it announced married couples could now have three children. To little avail: a whole generation had grown up believing one child was optimal and, in the meantime, a growing cohort of middle-class women, as in the west, are increasingly putting off parenthood, concerned about juggling family and career.

Yi Fuxian, a demographer at the University of Wisconsin-Madison, told the Financial Times China was now facing a “demographic crisis that far exceeds the imagination of Chinese authorities and the international community”.

In the short term, China will likely recover from the economic damage caused by its strict zero-COVID policy and collapsed property sector, boosted by pent-up demand and the resumption of international travel. Its real challenge is continuing to grow as it had previously, in a very different global climate and now with a shrinking workforce.

Observers suggest China’s official target of 5.5 per cent annual GDP growth looks increasingly untenable as the global economy flirts with recession, central banks ratchet up interest rates and the geopolitical outlook around the Ukraine war remains muddy. “Uncertain” is how former prime minister Kevin Rudd this week described China’s immediate future.