Letters | As its population declines, China must step up support for innovation

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By the end of December last year, China’s population had decreased to 1.4118 billion, down by some 850,000 people from the previous year, China’s National Bureau of Statistics announced on January 17. It was the first drop in more than 60 years, “a truly historic turning point, an onset of a long-term and irreversible population decline”, according to Feng Wang, a scholar of Chinese demographic change at the University of California, Irvine.

Though the Chinese government replaced the one-child policy in 2016 with a two-child limit, and further relaxed it to allow a family to have three children in 2021, the national birth rate has continued to fall. China’s annual net population growth declined from 9.06 million in 2016 to 480,000 in 2021.

This trend will present serious challenges to China’s social and economic vitality. It will lead to a rapidly ageing population and shrinking workforce that could undermine the country’s economic and social stability. As the birth rate continues to decline, the pool of wealth creators will inevitably shrink, while the elderly group in need of support, in the form of pensions and medical care, will expand.

Furthermore, if the size of the young population severely diminishes, it will lead to the decline in the number of people willing to innovate and start businesses, because most entrepreneurs are young people, who tend to be creative and innovative. This would negatively affect the push for innovation in China’s economy, which relies on an enormous market. Such a development pattern is similar to that of Japan in the past decades.

To reverse the trend of population decline, the Chinese government has initiated a series of measures, such as launching a three-children policy and promoting the development of the elderly care industry. Beyond that, the government can also implement more policies, such as tax incentives and financial support, to encourage young people to start businesses and innovate.