China’s Reverse Baby Boom

For the past two decades, China’s economy has relied on fast growth. During that period, its GDP has grown about 10 percent a year, an unheard of rate that outpaced almost every other nation, including the U.S. and Japan. Most countries are happy with two to four percent annual growth.

That increase has been the result of major leaps in population, plus a government commitment to industrialization. China hit its manufacturing stride in the 90s, followed by leaps in energy and agriculture in the early 2000s.

The big question about China, however, is whether the country can maintain such feverish growth. One indicator—its population—says China’s economic future won’t be as bright as its recent past.

China’s overall population continues to grow. But it’s number of working-age people has been declining for the past two years. That shouldn’t be a bad thing for a country with over 1 billion people and a mad urbanization rush. The problem, though, is China’s longer-term economy, which relies on a strong and growing labor force, which creates a strong and growing class of consumers. More than any other country in the world, China’s economy relies on dramatically increasing consumption—people who have jobs, buy things, and pay taxes. Remove any of those variables and the entire equation sulks.

One obvious culprit is China’s one-child policy, which, since 1979, has limited birth rates in urban areas (rural parents have been mostly exempt from the one-child policy and allowed to have two or more children). Back in the ’70s, demographers feared that overpopulation would lead to an inability of the underdeveloped country to care for so many people.

Flash forward to now. China needs more people, especially those between 16 and 59. Watching the number of those people decline is like watching China’s growth melt away over the next decade. And there will be little in the way of subsidizing companies and industries that the government will be able to do to offset sluggish growth.

There’s still some good news in these numbers—for China and perhaps more so for the rest of the world. A country’s birth rate is a symptom of its rate of development. Undeveloped countries have high rates not because they want more babies, but because they often need more family members to run a farm or business or care for parents in old age (it’s also true that developing populations have reduced access to contraception). In other words, children are helpful to buoy a family. As a country develops, the cost of living rises and children become more costly, so people have fewer of them. That’s what China is experiencing now.

So a low birth rate is proof that China is close to being a developed nation. And that’s good news for anyone wanting China to burn less fossil fuel, or extract fewer rare minerals with little regulation, or manipulate its currency, as China has been alleged of doing. Developing countries like to sprint at whatever cost to a better future. Developed ones run marathons to keep the good days rolling.