Data released today on the decline in the population of China for the first time in the last 60 years reveals the long-term consequences that both the Chinese and global economies will face as a result. The demographic decline in China brings with it issues related to demand, labor force, and economic growth.
This most populous country in the world has long been a key source of labor and demand, recording economic growth that has also stimulated the growth of the global economy. However, the National Bureau of Statistics announced that the total population in China fell by 850,000 in 2022, to 1.41175 billion people. This decline, the first since 1961, coincided with a slowdown in the growth of the Chinese economy last year, the slowest since the 1970s and the era of leader Mao Zedong, according to Bloomberg.
Historical Milestone
As a short-term consequence of the information regarding the population decline, Chinese companies producing baby clothing and similar products have recorded a sharp drop in stock prices, with shares of Kidswant Children Products falling by as much as 8.5 percent, and shares of Ningbo David Medical Device, which produces incubators, dropping by 11 percent, according to the Financial Times. On the Hong Kong Stock Exchange, shares of China Feihe, which produces baby formula, fell by three percent.
Although the decline began last year when the number of deaths exceeded the number of births, some demographers argue that this trend likely started earlier. The strict Chinese policy against the coronavirus that marked last year did not help these figures, but it also accelerated the decline in birth rates. Couples in China, in fact, postponed and decided not to have children during the health crisis and the economic slowdown.
However, the most significant impact on these results was due to the long-standing Chinese one-child policy implemented since the 1980s, which managed to prevent excessive population growth at the expense of the health and pension systems, which is now coming due as they face the threat of premature aging of the population. The measure was, however, abolished in 2016 when Chinese citizens were allowed to have two instead of one child, but it seems that the abolition of the measure came too late.
Wang Feng, an expert on Chinese demographic changes at the University of California, stated for FT that this is a ‘historical milestone, the beginning of a long-term and irreversible decline in population’ in China.
Brake on the Real Estate Market
The long-term consequences that demographic decline in China may cause not only to the Chinese economy but also to the global economy are concerning. The negative population trend could act as a brake on the real estate market in China, which is crucial for the growth of the Chinese economy. This could happen if demand for new homes and buildings falls.
Furthermore, the Chinese economy has already slowed down, and the prospects of surpassing the U.S. are diminishing. According to data from the International Monetary Fund, in 2021, the U.S. GDP was about 30 percent larger than China’s, while the U.S. GDP per capita was more than three times larger than China’s. A decline in U.S. GDP is also expected in the coming years, but the U.S. does not face the same demographic problems as China, although Americans are also recording low birth rates, which will not affect the slowdown in growth in the U.S.
