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Opinion | China’s three ‘grey rhinos’ – demographic crisis, debt and decoupling – are growing, threatening economic growth

  • The nation’s birth rate is plunging, its debt bubble is threatening to burst, and its allure as the world’s factory is losing its shine
  • Chinese authorities have already taken measures to prepare for these highly probable, high-impact threats, but more needs to be done

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China’s three growing “grey rhinos” are threatening its economy. Photo: Godong/Universal Images Group via Getty Images

China’s three biggest “grey rhinos” are growing. The term, coined by American author Michele Wucker to describe highly probable and high-impact threats, aptly describes the country’s demographic crisis, its mountain of debt and its decoupling with other major economies.

With China’s birth rate already falling off a cliff, the first grey rhino turns out to be far more menacing than previously expected. The country has already lost its title as the world’s most populous nation to India. The latest rumour is that China’s number of births could drop below 8 million this year, in another deep fall from 9.56 million in 2022, according to pregnancy records compiled by hospitals up till May.

If true, that would mark the lowest numbers since the People’s Republic of China was founded in 1949. It would also add fresh evidence that the country is plunging into the low-fertility trap that it created through decades of birth restrictions.

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The ageing Chinese town where the one-child policy worked too well

The ageing Chinese town where the one-child policy worked too well

Some Chinese researchers have argued that the country, with improved education and a massive labour force, would continue to benefit from new “demographic dividends” – favourable conditions for economic growth owing to the sheer size of the population.

But the argument is false because a rapidly ageing population is not a dividend. In fact, the demographic shift has already started to erode China’s growth momentum, and the problem will only get worse in the foreseeable future.

The second grey rhino – China’s debts, in particular local government debts – has been in view for years, and authorities have been trying to de-leverage for a long time. Although China has successfully avoided a debt crisis so far, room to muddle through this issue is shrinking fast.

It is a poorly-kept secret that it will be impossible for many local-government financing arms to repay their debts. Kunming, the capital of southwest Yunnan province, had to publicly deny a widely circulated memo stating that local financing vehicles were in trouble.

A monorail sky train runs over a street in Wuhan, central China’s Hubei province. Photo: Xinhua
A monorail sky train runs over a street in Wuhan, central China’s Hubei province. Photo: Xinhua
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