In Asia, there are some young countries, with an average age of around 20, such as India, Pakistan and the Philippines, and others with an average age of around 40, such as Japan, China and South Korea.
In April last year, India, with 1.4 billion people, surpassed China as the world’s most populous nation. In 2023, China’s population declined for the second year in a row: the birth rate is at an all-time low — down to 6.39 per 1,000 people — and deaths now exceed births.
The Chinese short circuit
“The infertility rate in China has increased from 2% in the early 1980s to 18% in 2020 due to the delay in the age of marriage and childbearing and changes in lifestyle,” he explains. TPI Professor Yi Fuxian, a senior scientist in gynecology at the University of Wisconsin-Madison and author of “Big Country with an Empty Nest.” Fuxian has spent two decades assessing the world’s most populous nation and is a dissenting voice in the debate over the one-child policy. “Psychologically,” he says, “fertility culture has been destroyed by modern lifestyles and a series of political campaigns. Like the one-child policy, which has irreversibly changed the Chinese view of pregnancy: having only one child or no child has become the social norm in China.”
Introduced in 1979 to contain population growth under the leadership of Deng Xiaoping, the one-child policy aimed to control and plan births. It also paved the way for the practice of selective abortion, because culturally the birth of male children was preferred, considered more productive.
The Beijing government then implemented the two-child policy in 2016 and the three-child policy in 2021, and introduced a series of policies to encourage childbearing, but something went wrong.
“They have all been miserable failures,” Fuxian comments. “Today, the fertility rate in the Chinese cultural sphere is the lowest in the world. And this population decline will be accompanied by an aging population structure. The percentage of the population aged 65 and over will increase to 35 percent in 2050.”
So what should the state do to increase the fertility rate? “The one-child policy has reshaped the Chinese economy, reducing parenting capacity,” explains the professor. “For example, Chinese household disposable income represents only 44% of GDP, compared to 77% in the United States and 65% in the United Kingdom. In 2020, the total value of housing in China is four times its GDP, while in the United States it is 1.6 times and in Japan 2.1 times.”
According to Fuxian, Chinese authorities face a dilemma: “If China were to increase household disposable income to 60-70% of GDP to increase fertility, this would lead to a reduction in government power, which would shake the economic foundations of the current ‘authoritarian at home and aggressive abroad’ policy approach. Chinese authorities may simply not have the will to implement such a paradigm shift.”
Many young people cite the rising cost of marriage and parenting, including childcare, as reasons they are marrying less. That’s in addition to the burden many face in caring for aging parents and grandparents.
In 2020, China had five workers between the ages of 20 and 64 supporting a senior citizen aged 65 or older. There was already a social security deficit, and this ratio will continue to decline. Without a social security and family safety net, the pension crisis will turn into a humanitarian catastrophe. And, since women live on average six to seven years longer than men, they will be the main victims of aging.
Government subsidies have failed to change the underlying fact: that many young Chinese simply don’t want children.
“China is ready to replicate Japanese policies of reducing costs for parents, such as education, childcare, childbirth subsidies, and housing for young couples,” Fuxian says. “What the Chinese government intends to do, the Japanese government has already done, but it has proven to be costly and inefficient. Moreover, China, which is ‘getting old before it gets rich,’ does not even have the financial resources to fully follow Japan’s path.”
Domino effect
The scientist also explains what the consequences of this demographic decline could be for China and the rest of the world: “Aging,” he points out, “causes a slowdown in the Chinese economy, which in turn will slow down the global economy. India has overtaken China and become the most populous country in the world, which means that global geopolitics and geoeconomics are undergoing historic changes.”
“China’s manufacturing sector will be understaffed and will age and decline as rapidly as Japan’s,” Fuxian continues. “Japan’s share of global manufacturing exports has fallen from 16% in 1986 to 4% in 2021. In 1995, there were 149 Japanese companies in the Fortune Global 500 (the annual ranking of the world’s 500 largest companies measured by revenue) but only 47 in 2022. China’s shrinking workforce and manufacturing recession will lead to high prices and high inflation in the United States and the European Union. China’s declining and aging population means domestic demand is weakening and imports from the West will decline. The rapid decline in the home-buying population means the country’s housing bubble could burst, potentially triggering a global financial crisis worse than 2008.”
Are we therefore facing a threat to both the economy and social stability? “Around 2031-2035, China will be worse than the United States in all demographic parameters, and its economic growth rate will start to lag behind that of the United States,” warns the professor. “In the past, young China has tried to catch up with middle-aged America, and the economic gap has narrowed. But in the future, the economic gap between old China and middle-aged America will widen again. Aging will lead to deficiencies in social security and health care, leading to a series of social crises, but it will not trigger political unrest because there are not enough young activists. The oldest region, Northeast China, lacks economic vitality and strongly supports the government. Both economically and politically, Northeast China’s today will be the country’s tomorrow.”
“If we compare the Chinese economy to an airplane,” Fuxian continues, “we can say that the 1979 reform and opening policy ignited the fuel, namely young workers who pushed the economy to fly by an average of 10% per year from 1979 to 2011. However, the one-child policy cut off this economic fuel. China’s fertility rate has been lower than that of the United States since 1991 and lower than that of Japan, Italy, Greece and Portugal since 2000. China’s workforce aged 15 to 59 began to shrink in 2012, which in turn slowed GDP growth.”
“A rapid reduction in the young workforce,” the scientist concludes, “will lead to a decline in China’s manufacturing sector and a reduction in the trade surplus, which in turn could lead to a depreciation of the Chinese currency. Flying at high speed without sufficient fuel is dangerous for both China and the world.”
Tokyo tries
Meanwhile, Asia’s fastest-aging society, Japan, faces the problem of urban sprawl and rural depopulation: two sides of the same century coin.
To combat depopulation and encourage people to move away from an overcrowded Tokyo – which now has 37 million inhabitants – the country has increased financial support for families, who will be able to receive one million yen (equivalent to 6 thousand euros) for each child if they move to a disadvantaged local area: more than triple the incentive of 300,000 yen already in force.
It is not the first time that the Government has tried to use financial leverage to encourage people to leave, but this plan is certainly more generous and the executive hopes that around 10,000 people a year will take advantage of the offer.
But these incentives obviously also represent a response to the low birth rate that characterizes Japan today, where the number of births has fallen below 800,000 per year.
Although the Asian island nation has a population of around 125 million and has implemented family-friendly policies, its population pyramid is rapidly graying.
India’s challenges
Demographic trends are increasingly shaping economies and societies. While China and Japan will face severe birthrate declines and aging will change the fabric of society, India will face both the opportunities and challenges of becoming the world’s most populous country.
The youth population will contribute significantly to the realization of the economic potential of the country which, according to estimates by the World Bank, will have to invest 840 billion dollars in urban infrastructure over the next fifteen years to support its growing citizenry.
But the population growth will also bring the problem of job shortages. Although economists expect India’s GDP to grow by about 8.2% in the 2023-24 fiscal year — the highest among major economies — the country continues to face high unemployment rates (about 8%, according to the Center for Monitoring Indian Economy).
“Job creation will continue to be a very challenging issue in India,” says Shotaro Kumagai, an economist at the Japan Research Institute and an expert on Japan, Thailand and India. “Young labor and low labor costs will make the Indian economy competitive. The government is aiming for ‘Make in India’ by creating job opportunities and developing labor-intensive manufacturing. However, it seems unlikely that the country will become the second ‘world factory’ after China.”
Since September 2014, the Indian government has been running a campaign to promote manufacturing industry to overcome social problems like hunger, poverty and unemployment but this plan has not developed at the pace envisaged by the executive.
Scenario
Asia has been the center of global population growth for decades: what is happening now? “The Covid pandemic has shaped the demography of countries with effects that vary depending on each country’s stage of economic and social development,” Kumagai notes. “It has suppressed births because opportunities to meet potential partners/spouses have decreased due to worsening incomes and the imposition of restrictions. The driver of population growth is shifting from East Asia to South Asia. This is due to the rapid population decline in China and the continued population increase in India. The demographic changes that are taking place will affect the economic growth rates of both regions.”
According to the professor, whether or not South Asia will be able to increase its economic presence at a rate commensurate with its population growth will depend on improving productivity – attracting foreign investment through improving the business environment – political and social stability, and trade liberalization within the region.
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