China’s population dip may impact its long-term economic growth
As the population shrinks, the proportion of older people rises. This poses a huge burden on the economy
China’s population has shrunk in 2022 for the first time in six decades. That has sent bells ringing about the prospects China may be facing henceforth.
There is a long and tortuous history culminating in the phase when the country’s population is shrinking. China had imposed a strict rule in 1985 allowing couples to have only one child. This was done in the days of Deng Xiao Ping. Deng had just started his modernisation drive and he wanted a quick growth on the basis of a controlled population, the rate of growth of which was high at that time.
The disruptive processes and rules that were part of Mao’s Cultural Revolution in China had completely ruined the country’s economy. Mao’s reform measures for the Chinese farm sector had destroyed the nation’s ability to grow enough food to feed its people.
When this correspondent happened to travel with a very senior official of the Communist Party who was visiting India, he broke into a casual conversation. He said food was so scarce that people lived by whatever they could convert into food, including grass-roots and small moving creatures.
The only ubiquitous food item available used to be pumpkin soup. As the visitor recalled, at one point of time, even the sight of a pumpkin would give him the sensation of vomiting.
Facing such all-round scarcities, the party had imposed the one-child norm to limit the number of mouths to feed. The policy had worked so effectively that by the turn of the century, the population was plateauing.
Soon enough, indications were available that the Chinese population growth would slow down and then turn negative. That is, the death rate would exceed the birth rate and eventually in the absolute numbers the population should start shrinking.
Demographics, or the science of population trends and dynamics, is a study of extremely long-term phenomena. Changes happen over decades and slowly. But once the tendencies take hold, it is difficult to reverse them.
Demographers are predicting that what has been seen for the first time in the course of the last year about the growth dynamics of the Chinese population should continue and Chinese population should keep falling. The process can even assume speed before slowing down.
Of course, in 2015, the Chinese authorities had reversed its policies regarding child per family. Relaxing the one-child formula, they made it two per couple. Later still, they increased it to three.
However, the change in policy did not have any impact and Chinese couples shun getting babies. There are obvious reasons for this, including the high costs of raising babies in present day China, the breakdown of the traditional family set-up of mixed generation homes and the aspirational values of the young Chinese people.
In fact, the Chinese younger generations mocked the Chinese authorities exhortations to have more babies by citing the conditions of living. The young were forced to work for far longer periods than traditionally and their living costs and accommodation conditions were so uncongenial that most of them refused to even marry.
These changes have now hardened into social norms and behaviour. The fiercely competitive jobs markets and working conditions gave rise to alternative living styles. Various protests and alternative groups emerged which advocated for the young a more relaxed life by opting out of traditional rat-race.
This alternative living styles of the younger population segments help to explain the unprecedented popularity and acceptance of the Amir Khan directed Indian film, ‘Three Idiots’. Particularly to be mentioned is the ready adoption of the film’s song: “Give me some sunshine/ Give me some rain/ Give me another chance, I wanna grow up once again…….”
This is also a foretaste of what should happen in India as well.
However, the social aspects of the anger of the new generation apart, the falling Chinese population can have the implications for its economy.
As the population shrinks, the proportion of older people rises. This is called the ‘dependency ratio’ of a population. That is, for the economy as a whole, the working age population will have to generate that much more to support the non-working older generations.
This poses a huge burden on the economy and such growth could be attained only through ‘productivity growth’. But not only there are limits to ‘productivity growth’, the Chinese have been found to have followed a reverse strategy for growth.
So far, China has grown by slapping more and more resources to get an additional unit of GDP, that is, the reverse of ‘productivity growth’. It had avoided a stagnating economy by raising investments in the infrastructure sector and allied areas. Now, the returns from this would start falling.
The combined impact of these developments would also mean the slowing down of the Chinese economy. This is of course not unique to China, as many other economies have been witnessing similar dynamics.
As countries develop and grow and the citizens become affluent, the propensity for the growth of population dips.
The Chinese development is in line with what is happening in other developed economies in the region as well. Nearby, Japan has been seeing a falling population for years now.
Views are personal