67
China’s shrinking demographic advantage and economic strength and expanding strategic ambitions have created a geopolitical risk situation.
In January, China officially admitted that its population had started to decline last year. This is nine years earlier than projected by Chinese demographers and the United Nations. Its effects would be difficult to overstate. This means that all of China’s economic, foreign and defence policies depend on flawed demographic data.
For example, Chinese government economists estimated that by 2049, China’s GDP per capita will reach half or three-quarters of America’s. When China’s overall GDP grew by double or triple that of its rival, the US. However, this estimate was made only if the population of China in 2049 was four times more than that of the United States. Actual data shows a different situation. China can be considered lucky that it can maintain a stable birth rate of 1.1 per woman. The country’s population will be 2.9 times that of the US in 2049, and its demographics and economic indicators will all be much worse by then.
This flawed assumption will not only affect China. This can have a negative geopolitical impact and destroy the global order. Chinese officials and agencies have long been clinging to the belief of a rising East and a declining West.
Similarly, Russian President Vladimir Putin also believes that he has succeeded in maintaining a stable relationship with emerging China. He believes that the declining West will not be able to stop him in his aggression against Ukraine. The US has withdrawn from Afghanistan to focus resources on China. The US will not be reluctant to provoke Putin further.
An ageing population could permanently drag China’s economy back. Overall, the Italian experience also shows that the old-age dependency ratio (people aged over 64 divided by people aged 15 to 64) has a negative correlation with GDP growth. Such a role is played by the ratio of the age of people above the middle age of 64.
In 1950, the median age in Japan was 21 and in the US it was 29. One might expect that Japan had benefited from years of rapid economic growth. Since 1994, the prime age of the labour force (15-59) has started to decline. While the American working age is not expected to drop until 2048.
Japan’s GDP growth was slower than that of the US. Japan’s GDP per capita increased from US levels by 16 per cent in 1960 and 154 per cent in 1995. However, since 2022, the figure had dropped to 46 per cent and is likely to drop below 35 per cent in the future.
Similarly, if we look at the young population, Taiwan and South Korea achieved rapid economic integration in more than five decades. The GDP per capita income of these countries increased from 5 per cent in 1960 to 42 per cent in 1960 and 53 per cent in 2014. However, with the shrinking of the workforce, the economies of both started to stabilize. This caused the per capita GDP of Taiwan and South Korea to drop by 30 per cent compared to the US.
Considering all these situations, let us now think about China. In 1980, the median age in this country was 21 years. This is eight years less than the US and the same ratio from 1979 to 2011. During this period, China’s GDP grew at an average annual rate of 10 per cent. However, the prime age of China’s labour force (15–59) began to shrink in 2012, and GDP growth from 2015 began to decline to 7 per cent before falling to 3 per cent in 2022. From 1962 to 1990, an average of 23.4 million births per year made China the world’s factory.
However, China’s exaggerated official data shows that there were 9.56 million births in China last year. As a result, China’s production (manufacturing) will continue to decline. This can create inflationary pressure in the US and around the world.
In 1975, China’s population was only 1.5 times larger than that of India. The official figures of the Chinese government boasted that its population was 1.411 billion compared to 1.417 billion last year. To be honest, the population of India has already surpassed the population of China 1 decade ago and by 2050, the population of India is expected to be 1.5 times larger than that of China. India’s median age will be 30 and this entire generation will be younger than China’s 57.
In 2030, China’s GDP growth rate will begin to slow down compared to the US by 2031-35. In this situation, its GDP per capita income will be barely 30 per cent compared to that of America. However, Chinese officials estimated that it would be 50 to 75 per cent. If America is to be pushed out of the world’s largest economy, it will not be China but India.
China is investing heavily in artificial intelligence and robotics to keep the economy from falling behind. However, continuous innovation also depends on young minds, so it seems that it will be limited only for now. Moreover, robot workers do not consume and the main driver of any economy is consumption. The decline of China will not be sudden but gradual. In the coming decades, it will be the second or third-largest economy in the world.
But the widening gap between shrinking demographics and economic power and expanding political ambitions can make strategic miscalculations even worse. The happy memory of the past and the loss level can lead China to the same situation that it suffered when Russia invaded Ukraine.
Therefore, the Chinese leadership should also learn from the consequences of Russia’s encroachment on Ukraine and wake up from the unrealistic dream of national renewal of the “Chinese Dream”.
The United States should also learn a lesson. He has not been able to manage the declining Russia. America’s friends in Canada, the United Kingdom, Australia, New Zealand, the European Union, Japan and South Korea are also grappling with the increase in the number of older people in society. The economic condition of these countries has also reached a declining state.
Discussion about this post