China’s economic and social development is significantly influenced by its population policies. Over the past four decades, the country has experienced substantial growth in its GDP, largely due to the demographic dividend stemming from its increasing population, which has translated into a robust workforce. However, this advantage has diminished in recent years due to the aging population, leading to a noticeable slowdown in economic growth.
In response to this challenge, China has revised its population policies, most recently through the Chinese Parliament’s approval on September 13, 2024, of a new plan to gradually raise the retirement age. This decision follows the ruling Communist Party’s announcement in July to implement a voluntary and flexible retirement age policy aimed at stabilizing the labor market, maintaining economic and social development momentum, and addressing the economic pressures arising from a shrinking workforce.
Negative Population Growth:
The recent population policies in China, particularly the decision to raise the legal retirement age, are connected to various contexts, which can be outlined as follows:
Aging Crisis: The rapid increase in the aging population presents one of the most significant demographic challenges facing Chinese society today. The number of individuals aged between 60 and 69 constitutes a substantial portion of the population; by the end of 2022, there were approximately 280.04 million seniors over the age of 60, representing 19.8% of China’s total population. Additionally, around 209.78 million individuals were over 65 years old. In 2023, the percentage of people aged 65 and older reached approximately 15.4%, categorizing Chinese society as an “aging society” according to United Nations definitions. Official reports predict that the number of Chinese seniors over 60 will reach 300 million by 2025. Alongside the increase in the elderly population, life expectancy has risen to an average of 78.2 years. The World Health Organization anticipates that by 2040, around one-third of China’s population—approximately 402 million people—will be over 60, compared to about 254 million in 2019.
Economic Recovery Slowdown: The economic growth and prosperity that China has achieved over recent decades were heavily reliant on its massive human resources, given its large population. However, over time, the impact of demographic factors on economic growth has begun to wane. The Chinese economy has significantly suffered from a rapid decline in population over the past few years, recording its lowest GDP growth rates in three decades—3% in 2022 and 5.2% in 2023. During the first half of 2024, China’s GDP grew by 5% year-on-year. In this context, global financial institutions have revised their economic growth estimates for China in 2024 to below the government’s target of around 5%. Both Goldman Sachs and Citigroup project that China’s economic growth will decrease to 4.7%, following a slowdown in industrial output to its lowest level in August. Recently, the Chinese economy has faced multiple crises, including a declining number of workers and consumers, rising local government debts due to increased elder care costs and pension obligations, as well as a real estate crisis, diminished consumer confidence, and falling external demand.
Declining Population: Currently, China is grappling with a significant population decline, suffering from one of the lowest fertility rates in the world. The natural population growth rate has reached -0.6%, marking the first time since 1962 that China has experienced negative population growth. The population has declined unprecedentedly for two consecutive years. In 2022, the number fell for the first time in six decades due to an unprecedented drop in birth rates and a rise in deaths, totaling around 1.4118 billion people—a decrease of 850,000 compared to 2021. The birth rate also hit a record low of 6.77 births per thousand, down from 7.52 in 2021. For the first time in 2022, the number of deaths surpassed the number of births, with China recording 9.56 million births compared to approximately 10.41 million deaths. The death rate reached its highest level since 1976, at 7.37 deaths per thousand, compared to 7.18 in 2021. This decline in birth rates is attributed to the rising cost of living and a preference for smaller families. The population decline in China accelerated in 2023 for the second consecutive year due to increasing deaths and falling births, with the population decreasing by over 2 million people. This trend is likely to impact the Chinese economy, healthcare system, and social security, especially as the elderly population increases and birth rates decline. In 2023, the number of newborns in China dropped by 5.7% to nearly 9 million children, with the birth rate falling to a record low of 6.39 births per thousand people. Looking ahead, it is expected that China’s population will sharply decline in the coming years, with the number of deaths outpacing the birth rate. United Nations experts predict that China’s population will shrink by about 109 million by 2050, which is three times higher than their previous estimates from 2019.
New Policies
In response to the demographic challenge facing China due to the shrinkage and decline of its population, Beijing has adopted a package of new population policies. The most notable of these can be summarized as follows:
1. Allowing More Children: China has implemented various population policies aimed at increasing its population. In 2015, it abolished the one-child policy to encourage Chinese families to have more children. Couples are now permitted to have two children, and starting in 2021, the government began to implement a policy allowing families to have a third child. To address the unprecedented decline in birth rates and the potential for a population decrease by 2025, China announced new measures in August 2022 to encourage families to have more children. These measures include increasing spending on reproductive health and improving childcare services by both central and local governments. In October 2022, President Xi Jinping identified raising birth rates as a strategic priority and emphasized that the Chinese government would adopt a proactive national strategy in response to the country’s aging population.
2. Ending Foreign Adoption Policy: In alignment with international trends regarding cross-border adoption, and reflecting a significant shift, China recently announced that it would no longer permit the continuation of its foreign adoption policy for Chinese children. This decision comes after three decades of practice, during which more than 160,000 Chinese children were adopted by families around the world since the policy was enacted in 1992. This shift occurs as Beijing attempts to encourage young people to marry and have children, following a two-year decline in population. China’s decision to cease sending children abroad for adoption is part of its response to the growing demographic crisis it faces. The aging population has led to a decline in the number of Chinese children adopted internationally in recent years, prompting Chinese authorities to prioritize domestic adoption, which now constitutes approximately 90% of all adoptions in the country.
3. Delaying Retirement Age: In an unprecedented move, China announced that it would gradually raise the legal retirement age starting next year for the first time since 1978. Under the decision, which will be implemented over 15 years, the retirement age for men will increase from 60 to 63 years, while the retirement age for women will rise from 50 years for manual laborers and 55 years for office workers to 55 and 58 years, respectively. This decision aims to address the crisis of a declining population and the aging workforce in China, which has one of the lowest retirement ages in the world. It is likely that this step will slow the decline in the labor force in the Chinese market and support the economy, despite the potential risks of increased public discontent amid economic slowdown. Estimates suggest that raising the retirement age will enable the Chinese government to increase labor force participation rates, thereby mitigating the negative impacts of population aging.
Future Scenarios:
There exists a complex relationship between a country’s population and its economic growth. In examining the case of China, two main scenarios can be proposed regarding this relationship:
1. The Optimistic Scenario: This scenario posits that any future decline in China’s population will not adversely affect its economic growth. This assumption is based on the expectation that the population will stabilize at approximately 1.4 billion in the coming decades, along with China’s continued status as a massive market. This situation is likely to foster the development of big data and internet industries. Additionally, the potential for this scenario to materialize is bolstered by an improvement in the quality of the workforce and a transition from low-quality industrial chains to advanced industrial chains, which could significantly enhance labor productivity.
In this context, China may also benefit from advancements in robotics and their economic advantages to address labor shortages and rising labor costs. In 2022, China launched half of the world’s industrial robots, ranking fifth globally in terms of robot density in the manufacturing sector. Furthermore, China’s investments in automation have resulted in an increase in the ratio of robots to employees, reaching 392 robots per 10,000 workers.
International experiences indicate that negative population growth in a country does not necessarily lead to negative economic growth. Currently, 38 countries and regions are experiencing negative population growth, yet the majority maintain economic growth.
Moreover, despite a continuous decline in China’s workforce, its size remains substantial, with projections suggesting it will still encompass around 700 million individuals by 2050. This figure represents a significant boost to China’s production capacity and economic growth. Alongside this, the improvement in the educational levels of the Chinese workforce will facilitate a shift in the economic structure from labor-intensive practices to those that prioritize technology, capital, and knowledge.
2. The Pessimistic Scenario: This scenario anticipates that a substantial decline in China’s population will lead to a slowdown in its economic growth in the future. The premise of this scenario is that the ongoing decrease in population will result in a shrinking labor force, which will negatively impact economic growth.
Official statistics indicate a decline in the working-age population in China, which dropped to 865 million in 2023, accounting for 61% of the total population. This reflects a 5% decrease compared to 2016, when the labor force was 907 million, or 66% of the total population.
Other factors that could contribute to this scenario include weak domestic consumption, changes in the age structure of the population, a declining birth rate, and an aging populace. It is projected that within the next decade, approximately 300 million individuals currently aged between 50 and 60 will exit the workforce.
Additionally, rising labor costs resulting from the rapid decline of the labor force may impact labor-intensive manufacturing industries, potentially prompting them to relocate their operations outside China.
The Chinese government expects that by 2050, the elderly will constitute about one-third of the total population, along with children who are not yet of working age. Consequently, the Chinese economy will face new burdens due to an increasing number of less productive elderly individuals, who will also exert pressure on the healthcare system and pension funds. Furthermore, a rising elderly population could pose a significant obstacle for China in surpassing the United States as a global superpower and the largest economy by 2050.
In summary, it can be asserted that the demographic policies implemented by China have had positive repercussions on the significant economic growth experienced over the past few decades, facilitating its rise to become the world’s second-largest economy. However, this impact currently faces numerous challenges, trending toward relative decline due to the limited effectiveness of the measures and policies China has adopted to increase its population amid the acute demographic crisis stemming from a growing elderly population.
Nevertheless, several factors could inject new momentum into these demographic policies, including China’s recent decision to raise the retirement age. This move may enable China to emerge from the slowdown it is experiencing and foster economic recovery. Thus, the optimistic scenario, which suggests that China’s economic growth will remain unaffected by future declines in its population, appears to be the most realistic outlook.
