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Politics The U.S.-China trade war is based on a false assumption – and Canada is paying the price

Canada’s frozen relations with China are, at root, collateral damage in a much greater confrontation between Washington and Beijing, a trade war in which the Trump administration seeks to contain the Middle Kingdom’s burgeoning growth and power.

But that trade war is based on a false assumption. China is not destined to grow. It is destined to decline.

The country’s birth rate is collapsing. A May report co-published by Global Demographics and Complete Intelligence, two private-sector forecasting firms, states that China has fallen off a “maternity cliff,” with 2 million fewer births last year than the year before.

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As a result, the report concludes, the population of China will start to decline in 2024, five years earlier than previous estimates. At around the same time, the world’s most populous country, at 1.4 billion souls, will fall to second place, behind India.

“You should sell any shares you have in infant formula or children’s products,” said Clint Laurent, managing director of Global Demographics, in an interview. The Chinese market "drops by 25 per cent over the next 10 years in terms of the number of customers.”

In part, this birth dearth is the result of the country’s one-child policy, implemented in 1980 to slow a threatened population explosion, then relaxed in 2016 after authorities realized that explosion might be turning into implosion.

It is also the result of China’s rapid urbanization, which has increased the education and autonomy of Chinese women. Everywhere in the world, when women are able to control how many children they have, the birth rate goes down.

This phenomenon is particularly acute in Eastern Asia, which has some of the lowest birth rates on the planet.

South Korea, for example, recently reported its total fertility rate had dropped below 1.0, more that a full baby shy of the 2.1 children per woman needed to sustain a population.

China’s fertility rate is pegged at 1.5, according to a recent survey sponsored by the Bill & Melinda Gates Foundation, half a baby shy of replacement rate. But it may be headed lower, in line with Japan, which has a fertility rate of 1.2, and which lost almost 450,000 people last year. Taiwan is at 1.0 and Singapore is at 1.3. If Chinese fertility drops to these levels, then its population decline could accelerate in the years ahead.

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Having fewer people will help China reduce carbon emissions and combat pollution. But the economic costs could be high.

Fewer young people means fewer taxpayers to sustain pension and health-care costs of a society that gets older, on average, every year. Fewer young people also means fewer young consumers purchasing a new car or a gym membership.

It might also mean growing civic unrest, as young workers chafe at the taxes they must pay and support they must provide their elderly parents.

Reversing declining fertility – as governments from Sweden to Japan have discovered – is extremely difficult and expensive. Government-subsidized parental leave and child care may encourage some couples to have a child, but no developed country has succeeded in pushing its fertility rate back up to 2.1 through such programs, which are often cut back during economic downturns.

In any case, the Low Fertility Trap, as it’s called, dictates that at a certain point, people simply become accustomed to the idea of having one or two – or no – children. Rising living costs in crowded cities and increasing economic insecurity can also act as a drag.

The only solution to population decline brought on by low fertility is immigration. This is what keeps Canada’s population growing despite a fertility rate of only 1.7, well below replacement rate. Immigration also powers growth in the United States, where the fertility rate has fallen to 1.7, a record low, according to a recent report from the National Center for Health Statistics.

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But China does not welcome immigrants, conferring a major geopolitical advantage on the United States.

In the 1980s, Americans envied and feared Japan’s economic juggernaut. But Japan sank into three decades of economic stagnation, brought on in part by its low birth rate and aging population.

Fears about China might be equally misplaced. In about five years, the Chinese will start to grow fewer. And once that shift begins, it will never end.

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