China’s population is shrinking for the second year in a row: in 2023, it shrank by 2.1 million people.

According to UN projections, China’s population will fall from 1.41 billion today to 1.31 billion in 2050 and around 800 million in 2100.

Above all, the number of births fell sharply from 17.8 million in 2016 to just 9 million in 2023 (with an annual death rate of 11.1 million!). The situation looks even more grim when fertility rates are concerned. The average number of births per woman in China remained fairly stable at around 1.6 between 1991 and 2017, even under the one-party policy. However, it then declined to 1.28 in 2020 and to around 1 in 2023, well below the 2.1 level considered necessary to maintain the population. Although the Communist Party has lifted previous strict regulations on childbearing and is in the process of introducing wider incentives, measures so far have not produced the expected results. As a result, society is aging at a dramatic rate. While the proportion of the population aged 60 and over was only 10% in 2000, it is now over 20% of the total population, and it is estimated that by 2040 almost a third of the population will be in this category. This explains why it is often said that China will grow old before it becomes rich.  

The fact that China has been able to become the second centre of the world economy has been due in large part to the steady population growth and the population flow to the cities, in addition to the increasing capital expenditure and the expansion of education. On the one hand, population growth is good for economic growth, because it increases the labour force and internal consumption. The peak of this period was in 1987 when China’s population grew by more than 19 million, which stretched the Communist Party’s capabilities. The process of urbanization was at least as important a factor. In China, the urbanization rate was less than 20% in 1980, but now exceeds 65%. All this has happened while China’s population has grown from 950 million to 1.4 billion in the same period.

In China, urbanization has thus meant tens of millions of people migrating to the cities each year, providing companies with cheap labour, while the growing urban population has pulled the economy along through consumption.

On the other hand, urbanization has kept demand for new homes, services and infrastructure high. The linkage between population growth and economic growth is not unique, but it is clear that no other economy has been able to do so on such a scale and in such a short time, and that this has played a major role in China’s emergence as the world’s workshop. 

But those decades are gone. With the working-age population in decline, there will be less and less housing, schools, hospitals and roads, which will hurt economic growth. At the same time, more and more will have to be spent on pensions and care for the elderly. As a result of tight labour supply due to a shrinking population, wages have started to rise, leading to a shift of production to Southeast Asia and Africa. This process is temporarily offset by the fact that China’s urbanization rate is still below the developed countries’ level of around 80%, and thus some 150–200 million people are expected to continue moving to urban areas over the next two decades. The real solution, however, would be for China to shift from quantity-led economic growth to efficiency-led intensive growth driven by high-quality services-based consumption and knowledge-intensive manufacturing. To this end, the Communist Party, which sees economic success as an important source of legitimacy, has introduced major reforms over the past decade.

The stakes are high: if China succeeds, it will catch up with the advanced central economies.

If not, the country will indeed grow old before it can become rich. The already bumpy road is made even more difficult by the fact that China would have to work with an aging population to push ahead with the creation of the latest technologies.

Just as important for the outside world is the question of how this will affect the global economy and, through it, us. In recent decades, we have become accustomed to China accounting for a third of world economic growth, and the way for other countries to avoid economic crises has often been to engage increasingly intensively with China. This will certainly not be the case in the future: demographic reasons and the aspirations of a model shift also point to a much slower growth trajectory. Above all, demand in China for imported goods is expected to fall. This will affect everyone from raw material producers serving the Chinese manufacturing industry to companies selling luxury goods. But the partly forced transformation of the economy also means that China will increasingly compete with developed countries for both the highest value-added manufactured goods and global services, while goods from China will also become more expensive. And should world workshop activities fail to be outsourced to low-cost producer countries, we may have to adjust to a more moderate consumption lifestyle in the future. 

The author is a historian, a fellow of the John Lukacs Institute at the University of Public Service, Budapest

Cover picture: Silver-hair rally in Hong Kong supporting young protesters in July 2019