China’s Population dropped in 2022 reported economic growth

China’s population is currently approximated to be around 1,412.75 billion people, and it is expected to continue growing, albeit at a slower rate due to the country’s one-child policy and ageing population.


China population in 2022

However, there are some indications that the Chinese government is thinking about relaxing or even repealing the one-child policy, which could result in a slight increase in population growth.

But since the disastrous Great Leap Forward of Mao Zedong in the 1960s, China’s population declined last year. Perhaps it would be more accurate to say that China has declared a population decline. Many observers are sceptical of Chinese data; for example, when China released new data on economic growth, many people asked not “Why was growth 7.3 percent?” but “Why did the Chinese government decide to say it was 7.3 percent?”

In whatsoever case, it’s clear that China’s population has reached or will soon reach a peak; the best bet is that population has been declining for several years. But why should this be considered a problem? After all, many people worried in the 1960s and 1970s that the world was facing an overpopulation crisis, with China being one of the major sources of that pressure.

And, with its well-known one-child policy, the Chinese government attempted to limit population growth.
So why isn’t population decline good news, indicating that China and the world in general will have fewer people putting demands on a finite planet’s resources?

The result is that a declining population poses two significant challenges to economic management. Given intellectual clarity and political will, these issues are not insurmountable. Will China, however, rise to the occasion? That is far from certain.
The first issue is that a declining population also means an ageing population, and in every society I can think of, younger people are expected to support older people. The three major social programmes in the United States are Social Security, Medicare, and Medicaid; the first two are explicitly aimed at seniors, and even the third spends the majority of its funds on older Americans and the disabled.

From each case, the funding for these programmes is ultimately dependent on taxes paid by working-age adults, and concerns about America’s long-term fiscal future stem primarily from a rising old-age dependency ratio, or a rising ratio of seniors to those of working age.
China’s social safety net is underdeveloped in comparison to ours, but older Chinese rely on government assistance, particularly the state pension. And China’s dependency ratio on the elderly is skyrocketing. This means that China will have to either inflict significant economic pain on its elderly or significantly raise taxes on younger citizens, or both.

Some other issue is more subtle, but no less serious. To maintain full employment, a society’s overall spending must be high enough to match the economy’s productive capacity. You might think that a shrinking population would make this task easier. However, a declining population, particularly a declining working-age population, tends to reduce some important types of spending, particularly investment spending. After all, if the number of workers declines, there is less need to construct new factories, office buildings, and so on; similarly, if the number of families declines, there is less need to construct new housing.

As an outcome, a society with a declining working-age population is more likely to experience persistent economic weakness. Japan exemplifies the point: Its working-age population peaked in the mid-1990s, and despite decades of extremely low interest rates, the country has struggled with deflation ever since. Other wealthy countries whose demographies have begun to resemble Japan’s have recently faced similar issues, though these issues have been sidelined — temporarily, I would argue — by the inflationary burst caused by policy responses to Covid-19.

So being fair to the Japanese, they have arguably handled population decline fairly well, avoiding mass unemployment in part by propping up their economy with deficit spending. This has resulted in high levels of government debt, but there is no indication that investors are losing faith in Japan’s solvency.
Can China, whose working-age population has been declining since 2015, manage things in the same way? There are valid grounds for scepticism.

China’s economy has long been wildly unbalanced. For reasons I admit I don’t fully understand, policymakers in the country have been hesitant to allow the full benefits of previous economic growth to be passed on to households, resulting in relatively low consumer demand.
Instead, China has sustained its economy through extremely high rates of investment, far exceeding those observed in Japan during the infamous late-1980s bubble. Investing in the future is normally a good thing, but when extremely high investment collides with a declining population, much of that investment will inevitably yield diminishing returns.

Undoubtedly, China’s economy appears to be reliant on an extremely bloated real estate sector, which appears to be a financial crisis waiting to happen.
It would be naive to believe that China cannot address its demographic challenges. After all, China has been an incredible success story in the long run, transforming itself from a poor, developing nation to an economic superpower in just a few decades.
On the other hand, I’m old enough to recall when every other business book featured a samurai warrior on the cover, promising to teach the management secrets that had helped Japan become the world’s economic head honcho.

The aspect seems to be that, just like with investment funds, past performance does not guarantee future results. We don’t know how much China’s demographic challenges will cause it to stumble, but there are reasons to be concerned; pessimists have compared the situation in China to that of post-boom Japan, but without the same high level of social cohesion that allowed government and society to cushion the fall.
Oh, and China is a superpower with an authoritarian and apparently unpredictable leader. I don’t think it’s alarmist to be concerned about how it will react if its economy suffers a setback.

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