China: consequences of low birthrate for its economic ambitions

Crystal, who wants to hide her real name, is a 26-year-old girl living in Beijing.

Unlike most women of previous generations in China, she is not married and does not face pressure to do so.

When asked why, he laughs, “I think it’s because my family members never got married or are divorced.”

It seems to be a common sentiment among young women living in urban centers in China.

A 2021 survey by the Chinese Communist Youth League of nearly 3,000 people aged 18 to 26 found that more than 40% of young women living in cities had no plans to marry, compared with less than 25% of men.

This is due, in part, to the rising cost of childcare and the specters of China’s one-child policy.

“Having only one child or not having children has become the social norm in China,” says Yi Fuxian, a senior scientist in obstetrics and gynecology at the University of Wisconsin-Madison and a leading critic of the one-child policy.

“The economy, the social environment, education and almost everything else has to do with the one-child policy,” he adds.

For Beijing, this is a worrying trend because China’s population is declining.

The country’s birth rate has been falling for years, but in 2022 the population fell for the first time in 60 years.

This is bad news for the world’s second-largest economy, where the workforce is already shrinking and an aging population is beginning to put pressure on state services.

China’s working-age population, aged 16 to 59, currently numbers about 875 million, just over 60% of the country’s population.

But that number is expected to fall further, by another 35 million, over the next five years, according to an official government estimate in 2021.

“China’s demographic structure in 2018 was similar to Japan’s in 1992,” Yi says. “And in 2040 it will be similar to that of Japan in 2020.”

Many economists had assumed until last year that China’s growth would surpass that of the United States by the end of this decade, a milestone that would cap the country’s extraordinary economic rise.

But this now seems unlikely, according to Yi, who says that “by 2031-2035, China will fare worse than the US in all demographic metrics and in terms of economic growth.”

The average age in China is now 38 years old. But as the population ages and birth rates plummet further, there are concerns that China’s workforce will be unable to support those who have already retired.

The retirement age for men in China is 60 and for women it is 55.

Today, those over the age of 60 make up almost a fifth of the population. In Japan, which has one of the fastest aging populations in the world, nearly a third of the population is 65 or older.

“Population aging is not unique to China, but the pressure on China’s pension system is more acute,” says Louise Loo, a senior economist at Oxford Economics consultancy.

Loo points out that the number of retirees has already exceeded the number of contributors and this has caused a drop in contributions to the pension fund since 2014.

The country’s pension fund is administered at the provincial level and on a “pay as you work” basis, meaning contributions from the workforce cover the pensions of retirees.

So Beijing, aware of the cracks in its system, created a fund in 2018 to shift pension payments from wealthier provinces like Guangdong to those facing deficits.

However, a 2019 Chinese Academy of Social Sciences report predicted that due to a shrinking workforce, the country’s main pension fund would be depleted by 2035.

In 2022, China launched its first private pension plan in 36 cities, allowing people to open bank accounts to buy pension products like mutual funds.

But Loo says it’s unclear whether many Chinese, who tend to invest their savings in more traditional avenues such as buying property, will turn to private pension funds.

These problems are not unique to China: Japan and South Korea both have an aging population and a shrinking workforce.

Yi claims that Beijing is about to replicate Tokyo’s policies to reduce the costs of raising children, but adds: “China, which is ‘getting old before it gets rich,’ doesn’t even have the financial resources to fully follow Japan’s path. “.

And this is not the only thing that concerns Beijing.

There is also a growing youth movement online calling for workers to reject the struggle for career success and free themselves from the pressures of a fast-paced capitalist society.

Added to this is a high youth unemployment rate, which peaked last July when 20% of those between the ages of 15 and 24 were unemployed.

Yi sums up the situation this way: “The labor is the flour and the pension system is the skill of making bread. Without enough flour it is impossible to make enough bread, even with the best baker’s skills.”

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