China is facing an “unstoppable” population decline over the coming decades that could have disastrous consequences for the global economy, a leading state-sponsored think tank has warned.

A report from the Chinese Academy of Social Sciences suggests the decline in fertility rates could lead to a decrease in overall population to 1990s-era levels of around 1.172 billion, down from just under 1.4 billion today.

It is just three years since China officially ended its decades-long one-child policy, yet the move has failed to produce a spike in birth rates and the report now warns “the era of negative population growth is almost here”.

As the country’s working-age population has stagnated, its dependency ratio, the number of working people in relation to non-working has grown.

According to the BBC, previous forecasts suggested China’s elderly population could hit 400 million by 2035, up from 240 million in 2017.

This will put enormous pressure on public finances and the social welfare system in China.

“Most Chinese are covered by state pension schemes. Now that fewer people are working, their contributions may no longer cover the benefits paid out to retirees, forcing the government to spend tens of billion dollars a year to cover the shortfall,” says Inkstone News.

Coupled with an ageing population, long-term population decline “is bound to bring very negative social and economic consequences”, the report says.

A large, young labour force has been key to China’s rapid economic growth over the past four decades, during which the country’s GDP grew an average of about 9.5%.

Now thanks to a shrinking labour force and rising wages, businesses are moving their factories elsewhere.

Inkstone News says “local companies will also have a hard time securing investment – fewer young people are working and saving money, while more elderly are taking money out of the capital market to spend on their retirement”.

The result is that China’s economic growth rate is expected to drop to 2% by 2050, research by the EU-China Social Protection Reform Project.

It could also have wider implications for the world economy.

CNN says that “as China's working age population shrinks so too will domestic consumption, which could have unintended consequences for the global economy, which has relied on China as a growth engine”.

The UN still expects the world population to continue to rise, albeit at a slowing rate, hitting 11.2 billion by the end of the century.

It also predicts India will overtake China as the world’s most populous country by 2024.

The Week

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