A Demographic Crisis Hitting Chinese Economic Ambition

It’s not that long ago than anyone with any degree of financial savvy was hitching a ride on the booming Chinese economy. With a huge population, a burgeoning urban middle class, a turbo-charged manufacturing sector and a government intent on turning the world’s most populous nation into an economic superpower, it seemed that investors really couldn’t lose.

Declining Birth Rate

Things have changed over the past few years. China’s National Bureau of Statistics announced that growth in 2019 was the most sluggish since 1990 and the birth rate was the lowest since it started being recorded.

A 6.1 per cent GDP growth was accompanied by a decline in the birth rate to 1.05 per cent.

This is despite the government’s official relaxing of the Deng Xiaoping era one-child policy in 2016. 14.7 million children were born in China last year, the lowest level in six decades.

The declining birth rate is particularly felt in Shanghai. Birth rates rose modestly in the city after the policy change but have now fallen back sharply. City leaders are now concerned about the impact it’s having on economic growth and social development.

A Global Challenge

The Chinese challenge is being felt across the world, particularly in countries that have developed fastest over the past couple of decades.

The UN’s World Population Prospects report expects 55 countries, including China to experience population declines over the next thirty years.

Labour Shortages

This situation creates a potential timebomb in China, with not enough labour to fill the assembly lines and care for an ageing population. Employers, particularly in regions that have led the economic expansion over the past two decades, are now reporting growing labour shortages.

A survey of companies in Sichaun found that 57.8 per cent of respondents were finding it difficult to fill vacancies as the working-age population declined.

Domestic Consumption

It’s also started to influence China’s domestic consumption, with demand for goods easing off as the proportion of young affluent people in the population began to tail off.

A shortage of young women, the cost of raising a child and increased professional aspirations have all been cited as reasons for the declining birth rate.