Column: China enters an era of population decline, and depending on policies, a bright future | Reuters

HONG KONG (Reuters Breakingviews) – For decades, foreign companies and investors have flocked to China in search of cheap labor and new markets. Sometimes this is due to lax worker protections and environmental regulations. With China’s decision to hand over the world’s most populous position to India, some capitalists are considering whether Indonesia or rather Mexico will be the “post-China”. But China’s demographics are not set in stone.

China’s total population in 2022 will decrease by 850,000 from the end of the previous year. According to the latest United Nations projections, by 2050 there will be 109 million fewer people. While most of East Asia is also ageing, China’s declining fertility and marriage rates are a silent vote of no confidence in the country’s future, against governments willing to dictate even the smallest family size .

Even before the coronavirus pandemic hit, China’s main public pension fund was expected to collapse by 2035. Underinvestment in social safety nets means the average couple must support grandparents, children and grandchildren. Meanwhile, an analysis by the Shanghai Academy of Social Sciences found that low-income urban households spend more than two-thirds of their income on their children alone. Even among middle-income couples, very few can afford to have a second child.

But Beijing has the world’s most powerful export engine, vast financial assets and stakes in state-owned companies with an estimated $30 trillion in assets. For such governments, there are no technical barriers to implementing a more equitable distribution of wealth and expanding welfare services. The productivity of an aging workforce can be boosted through the use of automation and artificial intelligence (AI). Encouraging immigration would also be an effective measure. In any case, with a little effort, China, the “workshop of the world,” should be able to maintain its dominance over emerging economies like India. In particular, India has problems with the judicial system and human rights, it imposes capital controls, and it is protectionist. In terms of this, it is not as sophisticated as China. In terms of gross national income per capita (GNI), which companies such as Starbucks and Tesla focus on, China overtook Mexico in 2018 and is more than five times higher than India.

The biggest obstacles to China’s development are gender discrimination, stinginess and poor policy response. For example, in 2021 the government effectively banned for-profit businesses in the online education sector. The government’s rationale was that doing so would reduce childcare costs and encourage families to grow, but it is complete nonsense. Also, the government’s arrogant request for young couples to have children will only fuel public alienation. Boosting fertility is difficult, but the experience of France and the Nordic countries proves that it can be done. Demographic pressures do not necessarily imply economic decline if the 2022 population, which is decreasing, allows China to adjust its policy steering wisely.

Background news

* According to data released by China’s National Bureau of Statistics on the 17th, China’s total population in 2022 will drop by about 850,000 from the end of the previous year to 1,411.75 million. Decrease in population since 1961.

* The fertility rate, which indicates the number of births per 1,000 people, fell to 6.77 from 7.52 in 2021, hitting an all-time low. Deaths rose from 7.18 to 7.37.

* China’s total population will drop by 109 million by 2050, according to UN analysis. The reduction is more than three times higher than expected in 2019.

(The author is a columnist for Reuters Breakingviews. This column is based on the author’s personal opinion.)