China’s Birth Rate Not A Problem For Economy–Now

China’s birth rate continues to fall. “Last year’s 10.62 million births, down from 12.02 million in 2020, barely outnumbered the 10.14 million death,” according to the Wall Street Journal. China’s rate of births per female is now down to 1.3, well below the replace rate of 2.1. The country’s low population growth, both now and in the future, has caused worry about China’s future economic growth. That worry is much overdone, though it’s clear that China’s fastest growth is past.

Any nation’s economy depends simply on total population multiplied by production per person. That arithmetic is right but hides some important insights. Many people are not productive. That’s not an insult, but a recognition that children and many elderly people produce little of economic value. The arithmetic offers more insight if restated: A nation’s economy depends on total working population multiplied by production per working person.

In the immediate future, babies are a drain on the economy, not a boost. Every parent knows this. Twenty years from now, today’s baby will be important to the economy, but that is of little value to forecasters looking out a few years into the future.

China’s economic boom started when Deng Xiaoping too over political control in late 1978. He instituted numerous reforms including tolerance of entrepreneurial activity. That tolerance started with small steps but eventually led to massive industrialization, especially in coastal cities.

China’s rapid growth period came not from population growth but from population migration. The movement of people from poor rural areas to China’s cities may be the largest migration in human history. This migration shifted people from low productivity farm work to higher productivity factory work, and it was enabled by the government’s tolerance of entrepreneurship.

The rural farmers of Chinas were not bad farmers, but they produced relatively little because they lacked tools and, in the earlier years of communism, worked communally. The higher productivity of the urban factory employees led to higher wages, as businesses competed with one another for the available workers.

In previous articles I argued that due to current politics, China’s Economic Miracle Is Ending. Even before that, though, I had seen that China Is Too Mature For Rapid Economic Growth because the easiest opportunities for expansion had been used. The two points of view are compatible. The first is not necessary, while the second is inevitable.

In the coming years, China’s economic growth could rebound. A rebound would require the government to substantially relinquish the control over the economy that they have increasingly exercised in recent years. Even then, the growth would not match the ten percent rate achieved in many of the past 40 years. That’s not a forecast but rather a description of a possibility that seems unlikely at this point in time.

A nation does not need a growing population to have a high and growing standard of living per person, though a larger population will certainly swell the gross size of the economy.