China’s Population Decline may Affect Global Growth

China’s demographic dividend is something which helped it to rise this high. Now, it is the second largest economy in the world only because of its highly skilled population. But, a leading state-sponsored Think Tank said China is now facing unstoppable population decline which will have effects not only on China but also on the global economy.

A report from the Chinese Academy of Social Sciences states the decline rate in fertility rate in China may bring the population level to 1990s-era of 1.172 billion from 1.4 billion of today.

It should be reported here that China has stopped its decade long one-child policy. But, this has not resulted in the growth of population or birth rates. So, the report now warns of China having an era of negative population growth.

As per the recent report, the growth of the working-age population has stagnated so the dependency ratio of the non-working age population on them will be increased.

According to a previous report of BBC, the elderly population of China would hit 240 million by 2017 and 400 million by 2035.

The growth in the population of the elderly population will have impacts of huge degree on public finances and the social welfare system in China.

As most Chinese people are covered under the state pension schemes, the declining population of working age and increasing beneficiaries will have a huge pressure on the state to cover the payments to the retirees. The Government ultimately will have to provide in billions to cover the shortfall which will lead to less expenditure on other fronts.

So, the aging population and long term population decline will have very severe socio-economic consequences on the Chinese economy.

Previously, China’s phenomenal growth over the last decade was due to the young working-age population which provided China with a growth of 9.5 percent.

But, now the situation is gradually changing, due to the shrinking population and aging of people, labor-intensive factories are moving out to different places.

As per a report, especially the local businesses will have a tough time to secure investment as fewer people will work and there will be fewer savings and more people will be depended on them exhausting the savings in the guise of retirement benefits.

The EU-China Social Protection Reform Project states that Chinese growth will stop at 2 percent by 2050. And among all other reasons like the size of economy and apex of human development; the lack of working age population will have a factor in this.

But, the population trend is going to affect not only the local economy but also the global economy. The shrinking of the population in China will have less consumption resulting in slower growth for the exporting countries. Also, if the Chinese manufacturing slows down, the world will have its own implications with cheaper and competitive products.

But, the United Nation still expects that the world population will rise though at a slower pace. It expects to have a population of 11.2 billion by the end of this century. And, it also predicts India to overtake China in population by 2024.

With a rising population, the countries will have to bank upon the demographic dividend, especially the emerging nations. Countries like India and Brazil that have a relatively more young population will have a golden future if they are properly utilized.