China’s Economic Engine Is About to Start Shrinking

China’s Economic Engine Is About to Start Shrinking


For several decades now, China has been closely linked to the US in economic terms. Depending on how you measure it, its gross domestic product has already surpassed that of its global competitors or is very close to it. Income is still very low in China, but in another important measure of life, life expectancy, China has equaled the US in the pandemic year of 2020.

As the century progresses, however, it seems likely that China will face an economic exchange with the US of a different, less favorable kind. The country’s working-age population of nearly one billion (defined here as those between the ages of 15 and 64) has been important to its economic growth, making it an international meeting place and a major consumer market. But according to population projections released last week by the United Nations, this group will begin to decline sharply in the 2030s, shrinking by nearly two-thirds by the end of this century. With the number of people working in the US expected to grow at the same rate in 2100 as it is now, China will go from more than four times to less than twice. Throw in Canada and Mexico, which are not part of the same labor market as the US but share a free trade zone, and the number of Chinese workers is expected to increase 1.2 times.

This, based on the “intermediate” of the UN forecasters, is expected to continue the population growth in China. They predict that the country’s fertility rate will return to its lows of the past few years and become closer to the US as the century progresses.

The outlook may be optimistic about fertility in the US as well, but the country may be relying on another source of population growth that China has not received and probably will not in the future: mass immigration.

The UN also offers a “low fertility rate” in which the birth rate remains at low levels in China and the US. As such, China is seeing its labor force decline by 80%, and North America will surpass it in 2097.

The year 2097 is a long time from now, of course, and none of this – beyond the 2030s decline in the number of people working in China that has already been burned by the recent decline in the birth rate – is doomed. The UN has been doing population censuses for a long time since the 1950s, and while these have been good at showing the world’s population, they are often not very accurate. The disappearance of two-thirds or more of China’s expected workforce is unprecedented in modern times, and the threat could lead to policy and social changes that slow or stop it. Many other things could happen in the next 75 years to change these predictions: climate disasters, world wars, alien invasions, the presence of one species, you name it.

Also, the UN’s population forecasts contain some information about future activities that may be more important than China and the US. Africa is expected to benefit the most, with the working-age population expected to nearly equal that of Asia by the end of this century. (For its groupings of countries/regions, the UN places Mexico in Latin America and defines “Northern America” ​​as the US, Canada, Bermuda, Greenland and St. Pierre and Miquelon.)

However, with the decline in the number of working people facing China in the past few years is already happening in East Asia – the number of people in Japan 15-64 has decreased by 17% since 1994, while South Korea and Taiwan seem to have reached a peak in 2017 and 2016, respectively. – The transition of this area from expansion to shrinkage will be difficult to ignore. Here’s another interesting comparison, which I’ve been driving all the way back to 1950.

The rise of East Asia has perhaps been one of the most important trends in the global economy in recent years. What does this mean about his decline?

By “declining” I don’t really mean something like the fall of Rome. Japan is still prosperous and prosperous despite the past forty years (until now) of a declining labor force. But its share of the world’s nominal GDP has fallen to 5.1% in 2021 from 17.9% in 1994. All the rich countries have given up their share of GDP to make room for China and other emerging markets, but the US has fallen to 23.9% from 26.1%, and the share of the European Union has decreased to 17.8% from 25.7%.

In 2021, China’s share of global GDP was 18.5% and its share of the world’s workforce was 19.2%. The latter is expected to drop to 6.1% by the end of the century. One way for China’s leaders to prevent a similar decline in GDP would be to make fiscal reforms that make per capita income higher than the global average. But as my fellow Bloomberg Opinion columnist Hal Brands and Tufts University China scholar Michael Beckley argued on Foreign Policy last year, fear of future recessions can also lead to counterproductive, and even more angry, responses: “The most dangerous trend in world politics is long-term highs followed by the prospect of high lows.”

The US is not facing such a prospect, perhaps not because of its population. One can assume that it is returning to population growth through the re-embrace of immigrants, parental support centers or both. At a time when Americans are hopeless, this is a happy hope to think about.

More From Other Bloomberg Opinion Writers:

Joe Biden Is Fighting the Wrong War Against China: Minxin Pei

Criminals for Hire Tips for a Highly Unstable China: Matthew Brooker

Xi Jinping Sends Mixed Messages to Investors: Shuli Ren

This column does not reflect the views of the editorial team or Bloomberg LP and its owners.

Justin Fox is a Bloomberg Opinion columnist who covers business. A former editor of the Harvard Business Review, he has written for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”

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