China's Shrinking Population [UPSC Notes]

China’s population is steadily shrinking, despite efforts to incentivize families to have more children. In this article, we explore how this phenomenon affects its economy and also the global economy. This topic is relevant for the IAS exam.

China’s Shrinking Population

• This demographic shift will soon make India the world’s most populous nation, and it will have far-reaching implications both domestically and globally. 
• In this article, we will explore the reasons why economists and others are alarmed by China’s shrinking population and the effects it will have on the world.

China’s Economic Engine:

• China used to have a lot of workers that made things for cheap and sold them all over the world. 
• But now there aren’t enough workers in China, which means that things might get more expensive for people who buy products made in China. To save money, some companies are moving their factories to other countries like Vietnam and Mexico. 

Decline in Consumer Spending:

• If there aren’t as many people in China, they won’t be able to buy as many things, which could hurt big companies that sell their products in China, like Apple products, Nike shoes, etc.
• This could have a big effect on the world economy.

Impact on China’s Real Estate Sector:

• China’s decreasing birth rate could have negative effects on its economy. The country’s real estate sector, which makes up around 25% of the country’s economic output, could be impacted in the short term. 
• The housing demand is driven by population growth, and homeownership is crucial for many Chinese people. 

Ageing Population and Struggles to Sustain:

• China’s ageing population is growing, and the government may struggle to support a large population with a smaller workforce. 
• According to a report by the Chinese Academy of Social Sciences, the country’s pension fund could run out of money by 2035, partly due to the shrinking workforce. 
• According to economists, China’s demographic crisis can be compared to Japan’s economic crisis in the 1990s.

China’s Retirement System:

• China has one of the lowest retirement ages in the world, with most workers retiring by 60, which puts a significant strain on the country’s pension funds and the healthcare system. 
• The households in China have lower incomes on average than in the US, and many older Chinese people depend on state pension payments during retirement.

China’s One-Child Policy

• China began the one-child policy in the late 1970s to prevent population growth from reaching unsustainable levels. 
• Couples who had more than one child were heavily fined, and many women were forced to have abortions. 
• In 2013, China relaxed its family size restrictions, but experts believe the change came too late to alter the country’s population trajectory. 
• Despite offering cash incentives and allowing up to three children, the government’s attempts to increase birth rates and solve the demographic crisis have failed.

Conclusion:

• The declining population of China will have significant and far-reaching consequences both within the country and globally. 
• This trend means that China will experience a similar ageing and shrinking population to its neighbouring Asian countries. 
• However, due to China’s massive size and economic influence, the effects of this demographic shift will be felt beyond the region and on a global scale.
• The impact of China’s demographic shift is one that will be felt for generations to come.

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