Zero population growth need not spell end of China’s prosperity

Instead of trying to reverse demographic trends, mainland authorities should focus on how to prosper in an era of flat population growth
An ageing population affects economic sustainability, technological progress and public spending, so policies must be adjusted accordingly

Nicole Chung Yuen-WingandPaul Yip

Published: 6:30am, 21 Apr 2022

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China’s population grew by just 0.34 per thousand head of population in 2021, one of the lowest rates in the past few decades. Further, population growth is likely to turn negative for 2022 and China will become a super-aged society by 2035.

Proposals are being discussed to boost marriage and child-bearing, including giving monthly subsidies to families with more than one child and providing free kindergarten care for the third child in every household. Providing support to alleviate families’ burden would help reduce costs and ease worries about bringing up children in mainland China.

However, it’s doubtful whether they would help increase the number of children. Such measures are good, but the impact on fertility would be limited based on overseas experience and our empirical studies. Small household sizes are becoming the norm in modern China.

Marriage figures from 2021 are the lowest in decades. Delaying marriage, remaining single and divorce are all on the rise, which is not conducive to having children.

Mainland authorities should focus on living and prospering in an environment of zero population growth, as high-income countries, including Japan, Denmark and Sweden, have done.

Flat population growth translates to fewer young people devoted to research and discoveries, thereby slowing technological progress. As a result, an era of secular stagnation could follow, risking recession and fewer investment opportunities. Zero population growth also results in a decline in labour participation rates, labour supply and productivity.

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An ageing workforce will drag down productivity due to lower adaptation of innovation and a decline in overall cognitive and physical abilities. Fewer people joining the labour force also means a smaller stock of knowledge and human capital, hampering productivity gains in society.

The growing number of elderly who do not pay tax will increase demand for social security schemes, bigger healthcare budgets and pensions, creating a far-reaching financial burden on local governments.

Higher rates of disability and morbidity resulting from degenerative diseases will see healthcare spending rocket. Zero population growth could thus increase budgetary pressure on governments and add to their long-term burdens.

China has several options to sustain development in an era of zero population growth. These include improving workforce participation and providing better support for childcare services.

Laws against sex discrimination could open more workplace opportunities for women, and flexible arrangements and embracing working from home could help mothers strike a balance between career development and a family.

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For older workers, policies such as raising the retirement age, continuous vocational training and flexible working hours could encourage seniors to stay in the workforce, helping society retain their comparative advantages. Retraining workers is particularly important to keep their skills up to date. These incentives could help offset the effects of demographic changes in the labour force.

The long-term scarcity of workers triggered by zero population growth cannot be offset by people moving from regions with a labour surplus to those with labour shortages. There is urgent need for more labour-saving innovation using artificial intelligence and advanced machinery.

This could enhance productivity in industries such as supply chain management, logistics and manufacturing. However, that could be a double-edged sword, as automation could also eliminate jobs.

It is vital to recognise the potential technological divide and job polarisation among lower-skilled workers. Policies should be further strengthened to manage the distribution of gains and support vulnerable groups, to harness the benefits of new technologies.

Even China’s rural families are turning away from having children

Immigration plays an important role in maintaining the economy, stimulating growth and complementing the domestic workforce of advanced economies. However, the mainland has yet to benefit and is instead losing young talent to other countries.

Favourable immigration policies such as releasing quotas and relaxing residency arrangements are important ways to attract talented workers and investors.

An ageing population comes at a price, whether it be with regard to economic sustainability, technological progress, the workforce or public spending.

It is time for national planners to think ahead and readjust state policies. China’s demographic transition will be challenging. Whether it will result in more crises or breakthroughs depends on the government’s responsiveness and adaptability.

Nicole Chung Yuen-Wing is a research assistant and is studying in the Bachelor of Arts and Science in Global Health and Development Programme at the University of Hong Kong

Paul Yip is the chair professor (population health) in the Department of Social Work and Social Administration at HKU