This is a situation that is becoming critical.
China is the world's largest population. It the second largest economy along with being the biggest exporter. In short, China became the world's manufacturing center.
There is a situation brewing that could spell a lot of trouble, not only for China but the world.
It is obvious we are in an interconnected economy. Even with the shift to tighter supply chains and the moves to produce more at home, we still see countries dependent upon each other.
For example, while China is the largest exporter, they are also a major importer. Many of the materials that go into products are imported. The same holds true for a great deal of food and energy.
An economy decline could have a major impact upon a country such as Australia. The Chinese buy a lot of materials from that country. Remove a percentage from the picture and it could be a big setback for those Down Under.
So it harkens back to the original question: how bad are China's demographics?
The U.N. did a mid-year revision of their numbers for China. The situation went from 1,425,925,000 in January of this year to 1,425,887,000 as of July 1 in the “Medium Variant” series.
For a country this size, it is nothing. However, this is a very telling sign. The expectation is that it will hit a .1% annual decline by the end of this decade and moving to .5% by 2045. Thus, the Chinese population, in 2050, would be more than 100 million below the projected for 2022.
Another issue is the fact the U.N. did not expect China's population to peak until 2031. This means we are arriving at this point a decade ahead of what many expected.
Dr. Yi Fuxian of the University of Wisconsin-Madison is a critic of the Chinese government and noted demographic expert. He contends the data is way off.
He states:
“Recently leaked China’s population data confirm my estimates: births began to decline in 1991, with no peak in 2004 or 2011; Population is now less than 1.28 billion, not the official 1.41 billion; Population began to shrink in 2018, not 2031 as officially predicted,” said Yi.
This makes the U.N. revision seem minor. According to Yi, the country is now down 130 million people off the official numbers. This completely changes the trajectory when we chart things over the next 30 years.
The recent decline in birthrates due to the COVID situation only further magnifies what many are viewing as a major problem. This is quickly becoming a demographic timebomb.
Demographics play a major role in our economies. Most of the advanced economies, including China, are based upon the idea of an expanding population. This was the case for many nations over the last 100+ years. This could be coming to an end as many countries, including the United States, could be facing a slowing, if not an outright reversal, of their population trends.
One of the biggest problem for China is the fact they have enormous pension commitments already. This is manageable when the number of workers far exceeds those drawing. However, if the situation reverses, it becomes a major source of contention.
We also have to keep in mind that China's debt-to-gdp ratio is the highest in history.
Is this a situation that it can manage?
Part of the issue stems from the fact the Chinese could produce and export the excess. Is this option going to be open to such a degree as more countries face similar circumstances? Even without the geo-politics, the demographics of the developed world could be an issue.
China could increase consumption but that is easier said than done. With a country that is facing a lot of headwinds, we could be see the peak in that country.
This does not bode well for the global economy. Quite simply, much of the growth over the last 35 years was due to China. Outside of that, things were rather slow. Pull them from the equation and we could see things really slowing down.
It is a situation to keep our eye on.
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