The Coming Decline of China – Part 1: Demography is Destiny

Over the past two decades the main story in international politics and the global economy has been the inexorable rise of China. Yet today it is almost certainly the case that Beijing's power and influence has already peaked, just as its population recently has, so the story of the next decades will be how the ruling Communist Party manages this decline....if the Party survives. The demise of such a major power is not something the international community has had to reckon with since the collapse of the Soviet Union in 1991, and as the war in Ukraine illustrates, over 30 years later the world is still dealing with the fallout from this. China is much larger in terms of population and far more crucial to the global economy than the USSR ever was. And with the bipolar certainties of the Cold War just a fading memory, the world no longer automatically looks to the United States for global leadership, and given the state of American politics of late, Washington cannot be relied upon to provide it. But Chinese decline is not a mere possibility, it is a certainty, the only questions left are when it happens and the form it takes.

The first and most obvious sign of Chinese decline is its population. In 1976 Communist Party General Secretary Mao Zedong died, and after a brief struggle for power in 1978 Deng Xiaoping emerged as China's new paramount leader. His first priority was economic reform to encourage development and growth, but the right sort of growth. China was always a populous nation, in 1949 at the defeat of the Nationalist government and the establishment of communist rule there were already more than half a billion Chinese. (By comparison, at that same time the population of the United States was about 150 million people, and there were close to 180 million in the Soviet Union.) Despite disasters such as the Great Leap Forward and, to a lesser extent, the Cultural Revolution, improvements in the economy and in maternal health plus encouragement from the state for large families meant that China's birthrate accelerated (to over five children per woman from the 1950s to the early 70s), infant mortality greatly diminished and average life expectancy rose from just 35 years in 1949 to 63 by 1975. Within a single generation China had gone from a mostly rural and agrarian society with high mortality to an industrialised and urbanised one with a high birthrate and good basic healthcare. Consequently, the already large population experienced rapid, and to the government in the 1970s, alarming growth.

The Communist Party's first attempt to curtail this came in 1973 with the “Later, Longer, Fewer” policy, which raised the minimum age for marriage to 23 for women and 25 for men, enforced three year gaps between births and limited couple to a maximum of two children. However this was not considered sufficient, and in 1979 the one-child policy was implemented. This was encouraged by propaganda, but enforced through contraception, forced abortions and in some case sterilisation. The justifications given at the time were that China's population already accounted for one quarter of humanity on just seven percent of the planet's arable land, that two thirds of the population were under the age of 30 and those born during the baby boom of the 1950s and 60s were just entering their reproductive years. Deng believed this restrictions on the size families was as crucial to his goal of quadrupling GDP before the year 2000 as his economic reforms. This also was the era of neo-Malthusianism, and it was widely thought that such growth would diminish living standards.

While there were some exceptions introduced in 1984 (such as the one-and-a-half-child-policy for rural areas, whereby if the first child was a daughter couples could have a second; the implication being that the girl was the “half”) and variations in enforcement depending on the region and the ethnic groups that lived there, this restriction remained in full force until 2013. Concerned about the obvious demographic challenges the country was facing, the Party allowed couples who were themselves both only children to have a second child, and then in on the first of January 2016 the two-child-policy officially replaced the old restrictions. However this did not have the effect it was hoped for, and while there was a small rise in births, this number fell below the Communist Party's targets for population replacement and thus continuing economic growth. Increasingly desperate to reverse this trend in 2021 all restrictions on family planning were lifted, but nothing changed as China's birthrate continues to fall. The accepted figure for a population to remain static is 2.1 births per woman, but in 2023 this was close to 1 for the whole country, and around 0.6 for major cities such as Shanghai. Across China kindergartens and primary schools began closing.

2021 represented the peak of China's population, it will only decrease from here. The PRC is not unique in this; most advanced economies have birth rates below 2.1 babies per woman; as Dr. Karan Singh drily observed in 1974,“Development is the best contraceptive”. However most developed countries are considered desirable places to live and work and so enjoy positive net migration, which replenishes the working age population and offsets lower domestic birth rates. This is not the case with China. An interlocking series of bureaucratic, political and cultural barriers exist to foreigners gaining permanent residency even if they wanted to, which few do. In 2019 30% of Australia's population was foreign-born, even in other North Asian countries that are culturally resistant to outsiders such as Japan and South Korea this figure was around 2%, in China it was 0.1 Meanwhile native born Chinese are far more likely to emigrate: in the past half century the United States has accepted around a million new migrants a year, while over that same period more than 265,000 people departed China every year to start new lives elsewhere. From not having children to leaving, the actions of its people suggest few Chinese have much optimism in the future of their country in its present state.

At the other end of life from the plunging birthrate, China will also be experiencing what is known as the “grey tsunami”. The economic prosperity of the past few decades combined with huge advancements in healthcare mean that life expectancy is now 77 years on average. Combined with the plunging birthrate this demographic shift will mean that by 2050 fully half of China's population will be aged 65 and over. Belatedly, the government has announced pension reforms to try and pay for this, and from 2025 the retirement age will rise from the current 60 years for males and just 55 for females. Ageing societies tend to be less economically productive, and with ever more citizens relying on state pensions or the support of their working-age children, overall consumption is likely to fall, further shrinking the economy. Meanwhile China's chief geopolitical rival India will continue to benefit from a young population, and is likely to attract manufacturing and other more labour-intensive jobs currently based on China, as older workers will want and need service-based jobs. At the same time Beijing will be unable to invest much in the economy as the cost of healthcare for the ageing population eats up ever more of the budget. In 2001, China spent around 500 billion yuan on healthcare, by 2022 this figure had reached 8.5 trillion yuan, and will only continue to sharply increase from there. China will get old before it gets rich.

These limited pensions are partially a consequence of state policy but also culturally. For decades the government has been able to save money by relying on traditional notions of Confucian filial piety to put the onus onto those working-age to support their elderly family members. However with people living longer and those early retirement ages, this has created the notorious “4-2-1” inverted pyramid, whereby four grandparents and two parents rely on support from a single wage earner, the one child the Communist Party believed necessary back in the 1970s. And this creates the knock-on problem of young couples choosing to have fewer or maybe even no children, because of the burden of supporting elderly relatives. A final consequence of the one-child policy is the skewed sex ratio, whereby that same traditional culture valued sons more highly than daughters. During this era sex-selective abortions were widely available, and while reports of tens of millions of “missing women” as a result of this have been called into doubt, nonetheless census data reveals more males than females, particularly in rural areas, and in turn many of these men will be unable to marry and have children themselves, further accelerating China's looming and inevitable decline.