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China’s demographic problem: a slow time bomb

Miguel Melo
Market Monday Febraury 19th 2024

If UN estimates prove to be accurate, China will experience the quickest population decline ever in history, and it may be less than half the size of the Indian projected population, which will redefine the world economy.

For a long time, nearly one out of every five on earth have found themselves living in China, but this may be changing. UN expects the Chinese population to drop from 1.4 billion to around 800-900 million, which will make so that the Chinese population will only account for around 8% of the world’s population, a fact that will dramatically change the world we live in.

China, even before it became an economic powerhouse, had an enormous influence on global affairs simply due to its giant population, and governments have always relied on this demographic advantage to deter its geopolitical rivals.
Currently, the Chinese population is more than 4x larger than the US population, but, by the end of the century, it may only be 2x larger. Even if we factor in the United States’ allies: NATO, Japan, South Korea, Taiwan, and Australia, they still only have a population of nearly 70% of China’s. That means that today, even this alliance is still at a disadvantage in available manpower in the event of a conflict with China. However, the US-led alliance network will keep its combined population relatively unchanged, which means that the demographic advantage will tilt into the alliance’s side. When combined with Washington’s current technological advantage will mean that Beijing will find itself at a disadvantage in every aspect. It is because of this that most analysts predict that a Chinese invasion of Taiwan will most likely happen in the next seven years, or it will never happen at all. 

This demographic crisis, caused by the 2-child and 1-child policies, will not only affect Beijing’s foreign policy but will also have profound impacts on the global economy. The Chinese working-age population peaked in 2016, as the people born in the baby boom period started to retire. As such, Chinese manufacturing, the backbone of the Chinese economy, will become more expensive than in places like India or Mexico, two countries that have massive young populations at the bottom of the population pyramid that will replace Chinese manufacturing workers. Apple, for example, has already started to make this move and tripled its iPhone production in India, which means that, not long from now, China may cease to be the world’s factory.

No one can predict what China’s population and economy will look like by 2050 or 2100, but many analysts have compared the Chinese situation to Japan’s, claiming that the first looks like it is mimicking what happened to the latter 30 years later. Like China, Japan also had a massive baby boom, which lowered dramatically the country’s median age and led the Japanese economy to grow quickly and almost surpass the American economy. However, as those people entered retirement, the economy stagnated. 

Past events are not indicative of future ones, but we must be prepared for what the future reserves, whether with a strong China or other countries taking its place.

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