China, known for its large population, is grappling with a demographic dilemma. With a population of 1.4 billion, consecutive years of negative growth, and 15.4% of its citizens aged 65 or older, the country faces mounting challenges.
The total fertility rate has dropped to 1.0, signalling a transition to a “low fertility” phase. Meanwhile, the working-age population is shrinking, and the elderly dependency ratio has risen from 8:1 in 2010 to 4:1 in 2023, placing increasing pressure on the workforce. According to the United Nations, China’s total population could drop by half to 767 million by 2100.
Evolution of government policies
In response, the Chinese government has shifted from its long-standing one-child policy to measures aimed at boosting birth rates. A two-child policy was introduced in 2016, followed by financial incentives and family support measures in 2018.
The three-child policy, announced in 2021, was accompanied by expanded maternity leave, childcare services, and housing subsidies. These policies aim to counter the high cost of living and stabilise birth rates over time.
Economic challenges of demographic shifts
The ageing population and declining workforce are straining China’s economy. Labour shortages threaten industrial productivity, and global supply chains may face disruptions as labour-intensive industries relocate to regions with lower costs. Raising a child in China costs approximately 6.3 times GDP per capita, one of the highest rates globally, further discouraging higher birth rates.
A shrinking youth population risks reducing innovation and market vibrancy, particularly in technology, culture, and education. Meanwhile, rising healthcare costs and pension burdens are putting significant pressure on fiscal budgets, dampening consumption, and increasing precautionary savings.
Opportunities amidst transformation
The “silver economy” offers potential for industries like health diagnostics, medical technology, and smart senior care services. Improvements in workforce quality are facilitating a shift towards capital- and technology-intensive industries, boosting efficiency. Moreover, demand for highly-skilled talent is driving efforts to attract global expertise, fostering international talent mobility.
As a pivotal global economy, China’s demographic shifts have far-reaching implications for businesses and supply chains worldwide. Enterprises must closely monitor these changes, adapt strategies, and seize emerging opportunities in the world’s second-largest economy.
