China’s population crisis: the country might grow old before it grows rich

While internal migration has boosted development in parts of China, it cannot change the facts of low fertility and population ageing
If the fertility decline cannot be reversed, China must turn to technological innovation and other adaptations, and set a realistic population policy

Mengni ChenandPaul Yip

Published: 4:00am, 6 Mar 2021

Why you can trust SCMP

China’s shrinking, ageing population has become a social problem.

Although the government began to relax the decades-old one-child policy in 2014 (by allowing couples to have a second child if either spouse is an only child), and adopted a universal two-child policy in 2016, the fertility rate has not improved as expected. China’s total fertility rate remains well below the replacement level, especially in urban regions.

The one-child policy, which was introduced in 1979, did not immediately slow population growth. The number of births was still on an ascending trend for eight years, reaching around 25.5 million in 1987. But since then, births have been trending down. Between 2003 and 2011, annual births hovered at 16 million, almost 10 million lower than the last peak in 1987.

The easing of the one-child limit from 2014 made a difference to the trend, but it was a blip. There was a sudden increase in the number of births, from 16.6 million in 2015 to 17.9 million in 2016. In subsequent years, the number continued to drop.

In 2020, only about 10.03 million newborns were registered in China, a steep decline of 15 per cent compared to 2019, according to statistics from the Ministry of Public Security.

We are not optimistic that the universal two-child policy will reverse the fertility decline, and resolve the issue of population ageing, given that small families have become the norm in China. This could prove problematic for a country that is hoping to bypass the “middle-income trap”: China could very well grow old before it grows rich.

To get a sense of how pressing the problem is, we examined the demographic and economic data for 31 provinces, vis-à-vis countries around the world at similar levels of development in 2000 and 2010.

Two findings are of interest. First, around the world, the total fertility rate is in inverse relation to the elderly dependency ratio. That is, the lower the birth rate, the higher the ratio of aged people to working-age people. Second, there is a positive relationship between GDP per capita and the elderly dependency ratio: the more developed a country is, the more serious population ageing tends to be.

And what of China? In 2000, the country showed data patterns similar to the rest of the world. But in 2010, China’s data patterns were exceptional – even unique. The negative relationship between fertility and elderly dependency turned slightly positive, and the positive relationship between gross domestic product and elderly dependency evaporated.

To put it another way, some Chinese provinces seemed to be growing rich without growing old.

01:33

China’s economy accelerated at end of 2020, but virus-hit annual growth lowest in 45 years

Decomposing the provincial elderly dependency ratios into four factors – migration, mortality, population momentum and growth of the elderly population – we found that elderly dependency actually decreased in Shanghai, Tianjin, Beijing and Zhejiang between 2000 and 2010. In particular, elderly dependency dropped by 17 per cent in Shanghai.

Growth of the aged population should have pushed up the elderly dependency ratio, but it was more than offset by the large inflow of working-age people. In Shanghai, with the other three factors remaining constant, the population inflow alone can bring down the elderly dependency ratio by 32 per cent.

How Chinese officials inflated the nation’s birth rate and population size for 2019

On the other hand, elderly dependency increased greatly in central and western China over the same decade. This is due not only to rapid growth of the aged population in these regions, but also the massive outflow of young working adults.

For instance, the elderly dependency ratio in Guizhou province increased by 41.2 per cent over the decade. Other factors remaining constant, migration alone can push up the ratio in Guizhou by 16 per cent.

The vast internal migration, from less developed regions in central and western China to the more developed east coast, has brought more rapid growth and a younger population to eastern China.

However, it has also resulted in a development imbalance between regions and growing income inequality within the country. Bridging the urban-rural gap is going to be a major hurdle in eradicating poverty.

02:45

Coronavirus pandemic puts the brakes on China’s usual Lunar New Year travel rush

While internal migration can boost economic development and change the population make-up in some parts of China, it cannot change the facts of low fertility and population ageing.

Indeed, these demographic issues are very likely to slow down the pace of economic growth. If there is no significant change in the fertility rate, the working-age population is expected to decline from 70 per cent of the population to 60 per cent by 2045.For China to maintain an annual GDP growth rate of 7 per cent over 2015-2045, each worker needs to be nine times as productive as in 2015. For a more realistic growth rate of 3 per cent, labour productivity still needs to triple by 2045.

How Covid-19 has worsened China’s growing north-south economic divide

The Covid-19 pandemic has pushed the world into recession. Although the pandemic is under control in China, its economy has still been hit. Whether China can continue to maintain fast economic growth is a matter of great uncertainty.

If the current demographic trend cannot be reversed and the labour force continues to shrink, technological innovation will have to compensate. China is already embracing new technologies like automation and artificial intelligence and developing new applications, which will improve efficiency and productivity, and should ease the coming labour crunch.

Still, it is never too late to develop an effective population policy. We simply need to understand the population better and try to steer development towards a desirable outcome.

Mengni Chen is a research scientist at Cologne University in Germany and a research officer at the University of Louvain in Belgium. Paul Yip is a chair professor in the Department of Social Work and Social Administration at the University of Hong Kong