China’s biggest problem for the century to come.
Why China’s ticking demographic time-bomb will prevent it from overtaking the United States as the world’s foremost superpower.
China is enormous. The sort of enormous that’s difficult to get your head around. With a population of almost 1.4 billion, China makes up about 20% of the world’s population or 1 in 5 humans. This is more than the United States, European Union, Russia and South America combined. Their military is the world’s largest with more than 2 million active personnel, and they have an annual GDP of almost $14 trillion, second only to the United States, and well over double that of third-placed Japan.
On its current trajectory of growth, China seems almost certain to overtake the United States as the world’s foremost superpower, a thought that frightens many in the global west. But in order to reach that milestone, China has a very large, very specific problem that it needs to overcome. It’s demography.
Unless something substantial changes, in just a few short years China’s seemingly relentless growth will be halted in one fell swoop. Its economy will be crippled, foreign projects such as the Belt and Road Initiative will stall, and its status as one of the foremost global powers will be severely challenged. All due to the demographic composition of the country. Let me explain.
The demographic problems China faces essentially stem from one main problem; a very low fertility rate. The fertility rate is the number of children the average woman can expect to give birth to during her lifetime. Currently, in China, the fertility rate sits at 1.6. This is well below the 2.1 required to compensate for deaths and maintain a given population, meaning that China will, before long, begin to shrink.
Currently, in China, almost 40% of the population are between the ages of 30 and 54. This large group will live longer than previous generations of Chinese thanks to improved healthcare and living conditions. When this is considered in conjunction with the fact that fewer babies are being born, we can clearly see that the median age in China will soon skyrocket. A report by Pew Research suggests that the median age will go from 35 now, to 46 by 2050, an increase of 11 years.
As the elderly become more numerous and fewer economically productive citizens are born to replace them, the dependency ratio in China — the ratio of the working population to the non-working population — will rise significantly. What does this mean for the country?
It means that there will be more elderly people relying on social security and pensions with fewer people paying taxes to fund them. This will be a huge strain on the country, and it’s likely the only viable solution will be raising taxes. This will happen at the same time that China’s labour force is shrinking. Basic economics tells us that reduced supply leads to increased costs, and this will be the case for Chinese labour. Increased Chinese labour costs will damage its manufacturing and export industries, as places like Africa and India become more appealing to businesses.
It is obvious then that a low fertility rate leads to unexpected and far-reaching problems. However, low fertility rates are a problem not found exclusively in China. Much of the developed world suffers from the same problem. China only has the world’s 36th lowest fertility rate. Japan, by contrast, has a fertility rate of less than 1.5 and has been shrinking since 2011. It is the world’s oldest nation with an average age of 46.3 years, and now sells more adult nappies (‘diapers’ for you Americans) than baby ones.
Many countries that suffer from low fertility rates actually incentivise couples to have children. For example, in Sweden, couples are offered 480 days of maternity leave per child. Many rich countries also offer universal child benefits, where they essentially pay people to have children in a bid to counter low fertility.
So if low fertility is prevalent in many societies and not just China, why do I predict it being such a large problem for the country? Well, it all has to do with where the low fertility stems from. In most developed countries, low fertility is actually a side-effect of otherwise good things; increased education, more opportunities for women and better healthcare. As the saying goes, the best contraceptive is economic development.
In China, however, this low fertility rate stems from something else entirely. Not a natural societal development, but a conscious policy decision by the Chinese government; the one-child policy. The one-child policy, for those of you who have found yourself living under a rock for the past forty years, was a law which limited the number of children that Chinese families were allowed to have to just one per family. Penalties for breaking this law were harsh, ranging from fines to forced sterilisation.
Putting aside any moral objections, the main problem with the one-child policy was that it worked extremely effectively. Whilst it’s doubtful that it prevented all 400 million births that the Chinese government claims, the fertility rate did fall substantially; from 6.3 in 1970 to just 1.6 today. This policy almost single-handedly caused the looming demographic problems now faced by the country. It has become, predictably, a massive obstacle that the country will need to overcome in order to realise its longterm ambitions. This begs the question then, if the result was so foreseeably damaging, why on earth was it adopted in the first place?
The answer is one that’s all too common; fear and ignorance. During the 1970s, fears of overpopulation were rife. Images of crowded megacities full of crime, hunger and disease were portrayed as inevitable consequences of humanity continuing its seemingly exponential growth.
In China especially, this narrative seemed to hold. The country already had a population of 800 million with a fertility rate of 6.3 (compared to 2.57 and 2.54 in the UK and the US respectively). There were also massive housing shortages and hunger, all of which seemed to play into the picture that China was destined for massive overpopulation problems if birth rates were not addressed.
However, in reality, neither China nor anywhere else needed to worry about overpopulation. This is because as countries develop, they naturally find an equilibrium at which their populations stabilise. Birth rates are inexorably linked to death rates, so when death rates move, birth rates follow within several generations. For much of human history, both the death rate and the fertility rate have been high. Even in some countries today, it is not uncommon for women to give birth to 6 or 7 children for just a few to make it to adulthood, due to poor living conditions and a lack of medicine. Birth rates are high, but so are death rates, so they balance each other out.
But as societies develop, it only takes a few improvements in healthcare and living standards for death rates to drastically fall. When death rates fall, birth rates will eventually follow, but it may take a few generations. So for a while, there’s somewhat of a transition period in which death rates are low and birth rates are high. During this time, the population grows extremely rapidly, and whilst societies are in this period population growth can seem exponential. But before long, birth rates will fall too. Women no longer need to have so many babies to ensure that some of them make it to adulthood, and the cost of raising a child becomes increasingly expensive as the country develops. This chart shows the process.
This pattern of development has been observed in every single developed nation and will hold true with third-world countries that are currently undergoing their own development. Population growth is finite. It will not continue forever, and the global population is predicted to peak at around 9 billion in 2090. As it turns out, Thanos didn’t have to worry. For a more detailed explanation on why overpopulation is merely a myth, I recommend this excellent video by Kurzgesagt.
So, coming back to China, we can see that they were not experiencing exponential, never-ending growth, but were merely in a transitional phase on their way to economic development. The problem that they were trying to fix with the one-child policy wasn’t even a problem, and in trying to solve it they have created a far more serious problem than overpopulation ever posed.
This doesn’t mean that China can’t come up with a solution to their low fertility. They know that the problem is there, and it would be naive to think that they’re not working toward solving it. In 2015, they repealed the one-child policy, essentially acknowledging its problems, although experts doubt this will now make a substantial difference to the fertility rate.
China also has a few things in its favour which may help it overcome this looming demographic crisis. For example, as more Chinese people move to the city, they’ll become bigger economic contributors, which will help with the increased costs of caring for the elderly. The young workers of today are also far better educated than those they’re replacing, with 11 years of schooling versus 6. And of course there’s also the larger trend towards an automation based economy which requires fewer workers, although this in itself has the potential for huge chaos (#YangGang).
It is also possible that the Chinese government will manage to increase fertility. But even if it does achieve this, you have to bear in mind that demographic changes are slow. People who are born today won’t start contributing to the economy for at least 18 years. And by returning to social engineering, albeit this time with the goal of increasing births rather than restricting them, there will likely be grave side-effects, as Charlie Campbell points out.
Ultimately, China’s response to the problem of its fertility will define its role in the 21st century. Whether it wins or loses this fight, it will be a stern test of the countries autocratic institutions. It is a good example of the national enervation caused by short-term policy-making from which any government can learn, whether it’s autocratic or no. Where possible, governments should legislate for the future, not firefight for the present.
