Will China Follow Japan's Demographic--and Economic--Trajectory?

In 2022 China's population fell for the first time in at least six decades, by 850,000 persons from 1.42 billion the year before.

However, it is worth remembering that China's working-age population (if defined as the 15-64 age category) had already been falling for many years before that--from its peak of 988.3 million in 2015 to 977.1 million by 2021 according to World Bank figures.* A drop of over 11 million, the reduction alone is equal to the entire working population of the seventeenth largest economy in the world, that of the Netherlands.

Moreover, significant as this is in itself still more significant is what it seems to portend, especially given the obvious point of comparison provided by Japan. That nation saw its own working-age population top out at a bit over 87.1 million in 1994-1995--and then steadily fall. A quarter of a century on, in the pre-pandemic year of 2019, it was down to 74.3 million--and as of 2021 down almost another million, to 73.4 million.

In short, the country's working-age population shrank about 15 percent in 25 years--a fact that has had significant, if generally poorly understood, economic consequences. We have heard much about the country's "lost decades" since the 1990s (to much shameful gloating in certain circles disapproving of its manufacturing orientation and its statist inclinations). But the truth is that, if Japan's economic growth during this period has been a far cry from what it was its boom decades, when we adjust the numbers for the contraction of its population we find that it actually grew about as fast as the other advanced industrialized countries with which it may properly be compared. That is to say that when we consider how Japan did per-worker it did as well as they--and perhaps better when we consider the country's continued run of manufacturing success in critical fields like the inputs required for microchip production, or robotics. However, the dwindling of the numbers of those workers (and one might add, the vagaries of currency values) were sufficient to significantly offset its growth at the aggregate level. And so even as Japan succeeded by some measures, its profile receded in others.

Not only is it easy to picture China broadly traveling down Japan's path, but some are predicting exactly that, with China's demographic contraction no less dramatic. As China's overall population falls (perhaps by a hundred million between now and mid-century) its working-age population will likely fall more sharply--with an official Chinese government estimate in 2016 anticipating a fall of nearly a quarter by mid-century, while I would not be surprised to find more recent estimates more aggressive still.

Meanwhile the economic consequences would be even more dramatic. After all, when Japan's demographic contraction got underway the country was not only already solidly "First World," but on its "cutting edge" technologically. By contrast China, with a per capita GDP between a quarter and a third that of the "high income" countries, remains a developing nation. That same fact means that the country, still playing "catch up," can expect to make headway relatively easily for a time, further narrowing the gap with the more industrialized countries, but with that contracting force (and the economic demands of an aging population) increasingly offsetting that progress, which was already slowing even before the disruptions of the pandemic. (In the 1978-2011 period China managed a 9 percent a year per capita growth rate, doubling per capita GDP every eight years--with the country managing a 10 percent a year in that last decade of 2002-2011. Since then it has not done much better than 6 percent, even when we exclude the pandemic. A comparable drop in the growth rate over the next decade would, of course, see China's progress slow to the weak rates of the more developed countries while, again, still well short of their income.)

Of course, what one is talking about (in China's case, at least) is a projection, rather than something that has already happened, and China's government is anxious to alter the country's demographic trajectory--with the conventional wisdom going that Sweden provides a model for how this could be done by making work and other aspects of social life more hospitable for working mothers. However, as Elizabeth Bauer observed, this thinking slights the reality. Apart from the fact that Sweden's fertility rate has been pretty consistently below "replacement level" (2-2.1) these past three decades (the average over 1990-2019 was 1.8, and the 2019 figure actually closer to 1.7), Sweden's rate was never so low as China's is now reported to be (1.3 as of 2020). The result is that the distance between where China is and where China's leaders want it to be is greater--while one might add, too, that Sweden never had China's skewed sex ratio to contend with (China still, as of 2019, seeing the birth of 113 males for every 100 females).

Moreover, to the extent that Sweden's social provision was effective it was provided by a society far richer than China's happens to be now.

Thus, along with the gap to be made up being greater, the resources for any sort of effort of this kind are smaller--and I suspect the politics less conducive. China's young people, like their counterparts elsewhere, if in particularly sharp fashion, are caught between the slave-driving work culture celebrated by a Jack Ma (darling of the business press, likely less beloved by China's working people), and the spread of a counter-culture of "lying flat" by young people balking at the absurdity of the rat race. The result is that it will take a lot more than the kind of band-aids that so-called "pragmatic" policymakers and their media cheer-leaders so prefer to stabilize the country's working-age population--enough so that a sharp contraction along some lines seems much more likely, and figuring out how to manage it perhaps a more appropriate object of their attention than fantasies of avoiding it altogether.

* The Chinese government defines "working-age" in terms of the 15-59 category, reflecting its having set a retirement age of 60, but I am using 15-64 because of its greater convenience for international comparison (while it should be remembered that China's government is openly discussing raising the retirement age, possibly making the 15-59 category less relevant).