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How China can turn its demographic decline into economic growth opportunities

Many experts believe a declining population will lead to an aging population, which will translate into contracting consumption, declining enterprise profits and an economic slowdown

By NewsChina Updated Nov.1

China’s demographic development is at a crossroads, according to analysts. The World Population Prospects 2022 released by the United Nations in July projects that “China is expected to experience an absolute decline in its population as early as 2023.” In August, the National Health Commission of China acknowledged that the growth rate of China’s population has substantially slowed and the population will start to decrease before 2025. 

Like some European countries and Japan, China’s demographic shift is the result of social and economic development, such as industrialization, urbanization and shifting cultural norms, a trend that cannot and should not be reversed. It is estimated that China’s birth rate had already dropped under the replacement rate of 2.1 almost two decades ago in the 1990s, which had an accumulating effect on China’s demographic shift. 

A low birth rate, low death rate and negative population growth rate will become normal features of China’s demography, yet there is no consensus on the impact of a negative population growth rate on a country’s socioeconomic development. 

Many experts believe a declining population will lead to an aging population, which will translate into contracting consumption, declining enterprise profits and an economic slowdown. Some argue that a declining population will discourage labor-intensive sectors and promote innovative industries with higher added value, which will benefit the competitiveness of the economy. Others argue the impact of the growth or decline of the population of a country depends on a variety of factors and should not be simplified. 

Despite the disagreement, the fact is that a declining population can coexist with economic growth. As China’s population decline will be a long and gradual process, it has ample room to adjust, turning a potential crisis into a development opportunity. 

First, China should study the potential impact of a declining population and devise a development strategy for such a scenario. 

Second, China needs to endeavor to increase its labor force participation rate, especially those of women and older people through delaying the retirement age, improving family support and eliminating discrimination against women in the workplace. 

Third, China needs to improve the quality of its labor force in order to obtain a new source of demographic dividend, not from the aging population structure but from the quality and educational level of its population. But this is only possible if China can achieve its much-desired economic upgrade so that the economy can absorb a large number of highly educated workers. 

Fourth, given China’s vast area and uneven development, the demographic situation varies between regions and between urban and rural communities. China needs to build a unified labor market across the country to increase labor mobility. Barriers and the cost for labor mobility across different regions and between urban and rural societies must be reduced. 

Fifth, China should learn from the experience of developed countries in dealing with declining populations by making China more attractive to foreign professionals. China should also make it easier for overseas Chinese to return to work in China. In the meantime, China should continue to upgrade domestic consumption and further tap the international market.  

Sixth, China still needs to try its best to promote more births through providing financial support for would-be parents in the care and education of their children. The government should strive to build child-friendly facilities and nurture a more child-friendly culture. 

Finally, what makes a declining population so worrying is that it also signifies an aging population. As China has one of the fastest-growing aging populations in the world, China needs to strive to build a robust elderly care system. 

As China’s demographic shift looks to be the norm, China needs to take a systematic approach to addressing the problems with its current demographic policies at all levels. This is the only way China can turn its demographic crisis into an opportunity.