Can China’s new premier raise the birth rate and avoid a demographic collapse?

With clear and frequent discrepancies in the data, no one knows the true extent of China’s ageing demographics
What is clear is that to improve China’s economic prospects, Li Qiang needs to boost births and raise the retirement age

Yi Fuxian

Published: 3:30am, 6 Apr 2023

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At a recent press conference, China’s new premier Li Qiang argued that the country’s demographic dividend had not disappeared, even though the population is declining. He supported his claim with impressive-sounding figures: China has nearly 900 million working-age people, out of a population of 1.4 billion, with more than 15 million people joining the workforce every year. But should we believe these numbers?

An examination of Chinese demographic data reveals clear and frequent discrepancies. For 2000, for example, the National Bureau of Statistics reported 17.7 million births – a figure that aligns with the 17.5 million first graders in 2006. And yet, while the 2000 census showed only 13.8 million children under the age of one, there were 14.3 million ninth graders in 2014.

There are several reasons Chinese demographic data is unreliable. For starters, local governments have a strong incentive to inflate population figures. More residents mean larger fiscal transfers from the central government, including funds for priorities like education, pensions and poverty alleviation. Likewise, households might claim to have more members to receive extra benefits from the local governments.

Politics provides another motive for exaggerating the birth figures. For example, to show that the shift from a one-child policy to a two-child policy worked, the National Health and Family Planning Commission reported 17.86 million births in 2016, a 7.9 per cent increase from the previous year. In the Shandong and Zhejiang provinces, the reported increase was considerably higher.

But the two-child policy was introduced in January 2016. So how could there be such a huge spike in births that year?

The simplest explanation is that it never happened. The number of administered doses of the Bacillus Calmette-Guérin vaccine – required for every newborn – barely increased in 2016. Moreover, there were only 17 million first graders in 2022 – instead of surging as expected, the number fell year on year, by 5 per cent nationwide and in Shandong, and by 1 per cent in Zhejiang.

More than three decades of malfeasance by Chinese officials and demographers have so muddied the demographic data that no one – not even top-level officials like Li – knows the real numbers. What is clear is that they are nowhere near as favourable as suggested.

Even if more than 15 million people technically join the workforce annually, as Li claims, about 22 million retire each year.

The average age of migrant workers increased from 34 in 2008 to 42 in 2021, and China’s prime-age labour force (aged 16-59), which underpinned the country’s economic miracle, began to decline in 2012, coinciding with a significant slowdown in gross domestic product growth, from 9.6 per cent in 2011 to 4.4 per cent in 2020-22.

While population ageing may not directly cause a recession, a higher ageing index – the number of people aged 59 and over per 100 individuals younger than 15 – has a strong negative correlation with GDP growth, as do a higher median age and proportion of people over 59.

These dynamics are apparent across Chinese regions. With relatively younger populations, southern and western China are still growing. But in the Heilongjiang, Liaoning and Jilin provinces of northeastern China – where fertility rates fell a decade ahead of the rest of the country – the economic engine has stalled.

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Though the government claims that northeastern China’s economy has grown, the fourth national economic census showed that the region’s GDP in 2019 was the same size as in 2012.

Just as a baker cannot make bread without enough flour, Li cannot deliver growth without enough labour. Population ageing alone could cause GDP growth to fall to 3 per cent by 2028, and that does not account for the other economic “grey rhinos” that Li is likely to face, including a housing bubble collapse and a government debt crisis.

Nor will upgrading the quality of “flour” change this, as Li seems to hope when he argues that rising education levels have put China on track to reap a significant “talent dividend”.

02:01

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As Japan’s experience shows, attempting to make up for a shrinking workforce by improving education can backfire. As Japan’s enrolment rate for tertiary education has soared – more than doubling since 1992 – the number of young people willing to work in manufacturing has declined.

From 1992 to 2021, the number of manufacturing workers fell by 35 per cent – more than double the decline in the prime-age workforce – causing Japan’s share of world manufacturing exports to plummet from 12 per cent to 4 per cent. The number of Japanese companies in the Fortune 500 fell from 149 in 1995 to 47 in 2022.

For China, overemphasising higher education could cause massive infrastructure projects like the Belt and Road Initiative to become a drain on a weakened manufacturing base. It could also compound China’s demographic woes by reducing fertility.

To improve China’s economic prospects, Li must raise the retirement age. But while similar moves in Britain in 2011 and in France today have sparked major protests, it is better to launch a gradual reform now than wait to implement a sudden and drastic increase.

Li’s real challenge is to increase the number of births and avert a demographic collapse. Unfortunately, this will be nearly impossible.

Yi Fuxian, a senior scientist in obstetrics and gynaecology at the University of Wisconsin-Madison, is the author of Big Country with an Empty Nest. Copyright: Project Syndicate