CNA Explains: Could China's shrinking population become a global crisis 'beyond imagination'?
CNA looks at how bad the decline is and what it could mean for Beijing's economic future and global influence.
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Once the world’s most populous nation, China now faces a demographic time bomb with its population shrinking for the second year in a row - and it is likely to continue doing so.
How bad is the decline?
The total number of people in China plunged by 2.08 million in 2023, according to its National Bureau of Statistics.
Its population was 1.41 billion in 2023 - compared with India’s 1.43 billion.
The drop was even sharper than the previous year’s decrease of 850,000, which was the first time since 1961 that numbers have fallen.
Then, demographers said this was not surprising, with China’s fertility rate steadily declining since the 1990s and among the world’s lowest. It fell to a record 1.09 in 2022, according to estimates.
Why is this happening?
Observers attributed China's latest population decline to a wave of pandemic deaths early in 2023, after the world's second largest economy abruptly dismantled its strict zero-COVID regime.
Last year, overall deaths went up 6.6 per cent to 11.1 million, with the death rate reaching its highest level since 1974 during the Cultural Revolution.
Meanwhile, new births fell 5.7 per cent to 9.02 million in 2023.
Births in China have been dropping for decades due to a combination of rapid urbanisation and a draconian one-child policy imposed from 1980 to 2015.
The birth rate was a record low of 6.39 per 1,000 people in 2023, down from 6.77 the previous year.
This is comparable with advanced East Asian countries like Japan - 6.3 - and South Korea at 4.9.
China is following in the footsteps of these societies, said Dr Zhao Litao, a senior research fellow with the East Asian Institute at the National University of Singapore.
Its population fall is similarly driven by long-term socio-demographic factors including delayed marriage, rising singlehood, changing lifestyles and values, and the high costs of childcare, education and housing.
In China, the average cost of raising a child until the age of 18 was 485,000 yuan (US$67,000) in 2019 - nearly seven times the country's gross domestic product (GDP) per capita and much higher than elsewhere including the United States and Japan, according to Beijing-based think tank YuWa Population Research Institute.
Many Chinese have also chosen to shun parenthood as they continue facing job uncertainties and low wages, said observers.
What are the consequences for China ...
A shrinking population adds to demographic problems China is already tackling, from a dwindling labour force to an ageing society.
Experts said it makes China’s already patchy post-pandemic economic recovery even more challenging, as the country faces a protracted property downturn, weak consumer confidence and youth joblessness.
"China's demographic crisis is beyond the imagination of Chinese officials and the international community, and China's economic outlook is bleaker than expected," said University of Wisconsin-Madison senior scientist Yi Fuxian.
"China's current economic downturn is not cyclical, but structural and irreversible, and China's economy is unlikely to surpass that of the US.
"China will have to engage in a strategic contraction, focusing on solving its domestic economic problems and demographic crisis, and improving relations with the West."
China, which has long relied on its workforce as a driver of economic growth, could well change the way it operates in future as it considers the ongoing shift in demographics.
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Added to all that is tremendous pressure on the younger generation to support an ageing population, with fewer people to look after more elderly.
Expenditure on healthcare and eldercare will also increase as people live longer.
China's population aged 60 and above was at 297 million - a fifth (21.1 per cent) of its overall population - in 2023, up from 280 million the previous year. This is expected to go up to more than 500 million in the year 2050.
The state-run Chinese Academy of Sciences sees the pension system running out of money by 2035.
Dr Zhao said: “Socially, China has yet to meet the demand for adequate and quality elderly care services, address the shortage of care workers, strengthen its pension and healthcare systems, and deal with structural unemployment.”
... and the rest of the world?
China's demographic shift could also have a profound effect on the rest of the world, as its slowing economy could drag global growth.
“With the decreasing population, China’s outbound tourists could be on the decline. The Chinese market may eventually become less prominent for international goods and products,” said Dr Zhao.
“Foreign investment in China also needs to consider changes brought about by the population decline such as the possible shortage of workers, shrinking demand for certain goods and services, and rising demand in some other sectors.”
The loss of human capital could impact certain labour-intensive industries in China more severely than others, such as manufacturing and construction, said observers.
In the long run, costs could be raised for consumers elsewhere.
On the other hand, with China’s labour costs likely to increase, neighbours like India with their younger populations and cheaper workers could benefit.
“In that case we will see, and this is already happening to China, a lot of labour-intensive and low-margin manufacturing factories move to India and also countries with cheaper labour," said Dr Xiujian Peng, senior research fellow at Victoria University’s Centre of Policy Studies.
“A lot of the supply chains will gradually move out of China (and) shift to India and Vietnam, but this is only for the low-margin and the labour-intensive manufacturing goods.”
How has China tried to fix this?
China has for some time been ramping up efforts to arrest its plummeting birth rate and encourage couples to have children.
In 2016, the country relaxed its controversial one-child policy to allow two children per couple. In 2021, it allowed three per couple.
China has also dangled a range of child-friendly initiatives and subsidies, including longer maternity leave, tax deductions, baby bonuses, child allowance, more infant- and child-care facilities, and better work-life balance.
President Xi Jinping has said China will "establish a policy system to boost birth rates and pursue a proactive national strategy in response to population ageing".
But such efforts will take time and may not work, said observers.
Dr Peng said the measures taken by China so far were not enough. “The government is finding it very difficult to change the minds of the young generation.”
She added that many other countries, including Singapore, Japan and South Korea, have tried to boost fertility rates, but with limited success.
Dr Zhao said Beijing's pro-natal policies have been "unevenly implemented across localities ... such adjustments come too late and too little to restore China’s fertility to the replacement level”.
He believes it would be better for China to focus on adapting to the reality of a declining population in the short term, rather than resorting to hasty measures.
“So far, East Asian societies have not found magic recipes that can effectively boost fertility, not to mention a bounce back to the replacement level,” Dr Zhao added.
“But given the resilience of cultures and societies, what concerns us today may not trouble us in the future, if social values change again to favour higher fertility.”
What lies ahead?
Observers believe China's decline in population is less drastic this year, as the impact of the COVID-19 pandemic wanes and people consider having babies in the more auspicious Year of the Dragon.
Even then, China could be standing at the beginning of a long-term population decline that will be difficult to reverse for at least the next 50 to 60 years, they noted.
United Nations experts see China's population shrinking by 109 million by 2050.
"We do not exactly know how (the population changes) will unfold,” said Dr Zhao. “The uncertainty is a major source of anxiety among the population and the policymakers.”
But he also stressed that the impact of China’s population decline would not be felt immediately.
“As one of the many factors shaping the economy and society, its impacts are less deterministic and definitive than many people assume,” said Dr Zhao. “To a large extent (these) hinge on how the government and society respond and adapt to it.”
He added that the demographic factor alone would not determine China's global role either.
"It depends on how much China unleashes the productive potential of its healthier and more educated population,” said Dr Zhao.
“If China can shift to innovation-driven development, its economic rise will not be disrupted and its global influence will continue to grow despite an ageing and declining population.”
