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China economy
CommentAsia
Deng Jing-Yuan
Deng Jing-Yuan

Opinion | China’s population decline is only a small part of a larger demographic problem

  • Much has been made lately of the fall in China’s population, but the real concern is its dwindling workforce, which peaked about a decade ago
  • Still, in that time China’s economy has continued to grow, putting it alongside places facing similar demographic challenges like Japan and Europe

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A man carries a child on his shoulders along a street in Beijing on August 2, 2022. Falling births is accelerating population ageing in China, a problem it has grappling with for years. Photo: AFP
Deng Jing-Yuan
In January, Western papers clamoured to cover China’s first acknowledged demographic decline since 1961. In the space of two days, The New York Times, for example, published eight pieces on the news. Words such as “problem”, “alarm”, and “crisis” dominated the headlines.

It would be wrong to only fault Western commentators for the hysteria. Chinese social media was awash with concerns for future state pensions. Even stock markets moved. Shares exposed to Chinese infant products fell on news release.

However, none of the grand implications that commentators discussed has much to do with China’s total population. Rather, it is working-age population that matters. Thus, the closest thing resembling a turning point already occurred when China’s working-age population peaked in 2012.

Let us consider the three areas capturing the spotlight: pension finances, of interest to China’s domestic audience; geopolitics, the sticking point for the international audience; and the economy, to which everyone tunes in.

First, the fiscal implications. The popular reasoning goes like this: in a pay-as-you-go pension system, the state funds the pensions of current retirees with contributions from current workers. As China’s population declines, the funding pool will dwindle. There might not be much left for current and future workers when they retire.

This much does reflect the situation China finds itself in. However, it has nothing to do with an absolute decline in population. Suppose, for the sake of argument, that a random 10 per cent of the population disappeared. On average there would still be the same number of workers per pensioner.

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