Near future of the Chinese economy as indicated in population decrease

In the Seventh Population Census conducted in 2020, it came to light that the trend of a decreasing birthrate and aging population was accelerating faster than anticipated. It is expected that China’s population will start to decrease in 2022. The following elements are pointed out as causes promoting the decreasing birthrate: (1) population decrease in reproductive-age women; (2) changes in the mindset of people nearing the life stage of marriage and childbearing, such as the tendency to marry later in life and less desire to have children; and (3) postponed marriage and childbearing due to the spread of COVID-19 infections.

Due to urbanization and popularization of higher education, current generations facing marriage and childbearing are increasingly more reluctant to have kids, and we expect that this decreasing birthrate trend will further accelerate going forward. Effects of relaxation of birth control measures such as the abolishment of the “One-child Policy” have only been temporary. Support measures such as the provision of childcare subsidies would not have a sufficiently large impact to stimulate motivation for childbearing.

The “floating population” excluding moves within the same city in 2020 was 375,820,000, which means that one out of four people in the country moved. The impact of this “floating population” on the increase/decrease of the population in provinces and cities has become significantly larger. Heilongjiang Province and Guangdong Province show a clear contrast when viewed from both the rate of population increase/decrease in 2020 compared to 2010 and the extent of increase/decrease calculated by subtracting the population in 2010 from the population in 2020; and we can say that Heilongjiang Province shows the state of “future China.”

In Heilongjiang Province, the population growth rate has continued to persist below the average of China overall since 2013, and further slowdown is expected going forward. Population growth slowdown will be unavoidable in China overall as well, but the rate of slowdown of China as a whole will be more moderate than that of Heilongjiang Province due to a higher proportion of young people.

In Heilongjiang Province, the balance of the Urban Workers’ Pension Scheme reserve fund started to go into the deficit in 2016. There is no doubt that the balance of this fund for the entire China will start to shrink sooner or later. As a result, pension finance in China will rapidly deteriorate, eventually becoming a headache in terms of national finance.

The earlier a population starts to decline in a region, the earlier housing prices start to decline and the larger the spread of the price decline. The Chinese housing market will become polarized between the regions where housing prices decline due to population decrease and regions where stable housing prices are maintained thanks to population increase.

Full-scale population decline in China is soon to occur, and poses several challenges for the Xi Jinping administration in its third term. Each of the challenges is hard to solve for the Xi Jinping administration—which is said to have solidified its power at the 20th National Congress of the Communist Party in October 2022—and has the potential to result in the slowdown of the Chinese economy and, ultimately, question the raison d’être of the Party.

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