The news that China will soon cease to be the world’s largest country, by population, should not have been received as an unwelcome development.
But the projection that in 2023 India will surpass China as the most populated country – a detail contained in this week’s annual United Nations world population forecast – capped a long-mounting frenzy within China’s media and political class about its faster-than-expected shift to a declining population.
Beijing, visibly alarmed by this pending milestone, is now desperately pursuing population-growth strategies that include incentives to have more children and, more ominously, restrictions on birth control and abortion rights (especially for minorities), as well as efforts to prevent well-off people from fleeing to more democratic countries.
President Xi Jinping’s about-face on population policy during the past half-dozen years might appear irrational, if you don’t understand the real source of anxiety. After all, Beijing spent decades alarmed by the spectre of overpopulation, attempting to combat it with sometimes draconian family-control measures.
But what actually caused China’s population to all but stop growing was its shift from being a poor agrarian country to an increasingly middle-class consumer economy. It is now home to about 400 million citizens whose family incomes fit securely into the global middle class (with family earnings between $19,000 and $95,000 a year).
The Chinese Communist Party, as it likes to boast, has succeeded in ending the horrific absolute poverty that was created during the postwar decades by, well, the Chinese Communist Party. As a consequence, China’s population stopped growing quickly for the same reasons that it has in two-thirds of the world’s countries: urbanization, education, greater equality for women and income security.
Why wouldn’t China content itself with being a non-impoverished country of more than a billion? After all, it is Indian Prime Minister Narendra Modi’s failure to attain this status that has given his country the population crown. Its female work force participation rate is a shameful 19 per cent (compared with 62 per cent in China) and its share of agriculture in employment has actually risen, to almost 40 per cent (while China’s has fallen below 25 per cent).
So why is Beijing so anxious? To understand that, you need to look beyond the headline national-population figures in that UN report. As economic writer Justin Fox noted in his analysis at Bloomberg, the striking change is how quickly working-age populations are falling: Within a few decades, Europe, Canada and the United States will have more working-age people than all of East Asia.
You might think this doesn’t matter any more. Aren’t we beyond the age when a country needed vast reserve armies of labour? China stopped being predominantly a low-wage export-manufacturing economy around the time of the 2008 economic crisis. There just aren’t that many very low-wage, labour-intensive industries at the heart of major economies any longer; the big growth sectors these days, especially in China, are all more skilled, more educated, service-dominated fields.
But Mr. Xi and his officials aren’t obsessed with the size of their working-age population because they want more workers; they’re obsessed because they believe an aging population, with fewer tax-contributing workers and more revenue-consuming pensioners, will make it impossible to escape the “middle-income trap.”
That theory emerged in 2006 to describe the paradox faced by most countries in Latin America and the Middle East, as well as some in Asia: The very economic growth that got them out of poverty made their wages too uncompetitive to rise beyond the slightly-above-poverty level, where they then remain stuck.
In his fascinating recent analysis of Mr. Xi’s decade-long obsession with the concept, Frank Tang of the South China Morning Post notes that the President and his cabinet have raised the spectre of middle-income traps dozens of times in major speeches and reports. Senior party officials have frequently concluded that the biggest barriers to breaking out of the trap are “the economic impact of the country’s rapidly aging population” and its falling fertility rate – possibly because they know that Asian countries that have escaped it, such as South Korea and Singapore, did so while their populations were still growing.
Major economic analyses of China’s economic prospects, however, conclude that any escape from the trap requires increases in efficiency, productivity and technological innovation – and an end to repressive policies that are quickly driving developed economies away from investing in, and trading with, China. A growing working-age population may make it cheaper and easier to do so, but isn’t really required.
Population decline will soon be the norm in all but a handful of countries. While governments around the world are racing to keep population up to avoid the higher public costs of that decline (especially in structurally underpopulated countries such as Canada), we’re all going to have to learn to make substantial progress without population growth. The soon-to-be second-biggest country ought to be leading the way.
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Doug Saunders