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Beijing, You Have a Problem

Jun 08, 2022

It has been said that demographics are destiny. It should not come as a shock, but China is growing old and aging fast

In 1978, the median age of a Chinese citizen was 21.5 years. By 2021, it had risen to 38.4, surpassing that of the United States. If China continues along its current trajectory and follows the rest of East Asia in descending to ultra-low fertility rates, its median age could rise to over 50 by 2050. By 2050, 330 million Chinese will be over age 65. 

China had the world’s largest elderly population in 2021. By 2050, its working-age population will have declined by 200 million people. Constructing a social safety net to meet the needs of an aging population will be expensive and complicated. As situated today, the iron rice bowl of China is not big enough to care for the rising elderly population. 

Demographics are not something that can be manipulated by even the all-powerful, President for Life, Xi Jinping. With virtually no immigrants coming to China, a stagnant population remains stagnant.  If one million people were born in China in 2016, there would be approximately 20 million twenty-year-olds by 2036. No statistical manipulation will change this fact. 

Due to its fertility rate and Chinese people living longer, the population in China is aging faster than almost all other countries. The sheer size of China’s 1.4 billion population only accentuates the challenge.   

Another key cause of the aging population is the one-child policy put in place to curb population growth during the worldwide baby boom of the 1950’s and 60’s. 

China relaxed its one-child policy in 2014, allowing couples in which one parent was an only child to have two children. However, due to the rising cost of living, housing pressures in China, emphasis on quality educational attainment, and the demands of caring for both elderly parents and increasingly, grandparents, fewer young Chinese are taking the bait and having more children. 

As I have argued for decades, what happens in China, does not stay in China. This aging crisis is a threat not only for China, but also globally, as we have witnessed during the COVID pandemic. Raymond Yeung, Greater China Chief Economist at ANZ, told CNBC’s “Squawk Box Asia” that China is a vital link in the global supply chain. He notes that another possible impact would be on the world’s financial markets: China’s high savings rate has not only been supporting global markets, remaining the preferred piggy bank for U.S. borrowing.  

By 2050, 330 million Chinese will be over age 65. According to a Chinese Academy of Social Sciences report, China’s population will peak at 1.44 billion in 2029 before entering “unstoppable” decline. China will then enter an “era of negative population growth. The ratio of young to old will be dramatically unbalanced by the rising ranks of the elderly, putting unprecedented weight on the ties that hold its society together. 

The absolute number of working age people stagnated as the numbers of dependent retirees rose to 17% of that population. China slipped from boasting nine workers for every retiree in 1978 to just over five in 2020, only a slightly better ratio than the United States.  

Due to the rise in China’s elderly population the nation will lose much of its ability to invest for future growth as it addresses its immediate man-made problems, not unlike those seen in much of the 20th century.  

This is not good or unexpected news for the world’s second largest economy and for the many around the globe who have grown reliant on it. China’s demographic challenge overshadows the multitude of problems its leaders must address. 

There is also a crisis brewing on how to care for the elderly in China. China must increase investment in elder care at a time when the economy is slowing, brought about by the unpredictable global pandemic and the government’s ham-fisted COVID policy that shut down Shanghai and other major economic zones. President Xi Jinping captures the problem well when he said, “Meeting the various needs of the huge elderly population and properly solving the social problems that an aging population brings are matters relating to the overall development of the country and welfare of the people.” Not to mention he maintains the “mandate from heaven” for remaining in power.  

As much as any policy the current Biden Administration might be capable of putting into place,

China’s own demographic problems may be the best hope for slowing China’s rise and assuring it does not come at the West’s demise. 

Josh Rogin, a foreign policy and national security columnist for The Washington Post argues that restraining China is now a multi-administration, bipartisan strategy that stands among the most important foreign policy adjustments since the end of the Cold War. 

President Biden came into office with a strong desire to change the course of U.S.-China relations that had grown tense under President Xi Jinping’s more forward style and the awkward and haphazard trade war policies of former President Trump.  

To curb China’s meteoric rise, President Biden and his team are working overtime

It should come as no surprise that China wants to rise. As a country, China was the world’s largest economy in 17 out of the past 21 centuries. The anomaly was the past couple of centuries when they were surpassed by other western countries economically and militarily. Since re-opening to the world four decades ago, central planning for education and manufacturing – in cooperation with the West – has resulted in a Chinese economy on steroids.  

The U.S. has been the undisputed ‘world champ’ economy since the end of WW2. I have argued that if America wishes to remain in the top position in the world it is time to stop whining and complaining about China and start investing in our country and the American people.  

To be clear, the Chinese government’s main goal is to restore their country to its historical greatness – a return to wealth, power, and world prestige. This point was driven home in Michael Schumann’s new book: Superpower Interrupted. The book offers atypical insights for understanding China’s place in the world, especially the drive to “Make China Great Again.” 

Yet, holding China back after decades of U.S. assistance and its WTO ‘Most Favored Nation’ status that helped it grow strong, may be the equivalent of building a chain link fence to hold back a tsunami that is rapidly approaching.  

Perhaps China’s own policy decisions, like the disastrous Great Leap Forward and Cultural Revolution will ultimately be the noose of their own making that thwarts or at least slows China’s desire to recapture their ‘fuqiang ‘or wealth and power.   

“Demography is destiny” may ultimately prove to be the wrench in China’s rapid rise. 

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