China’s Demographics: It Gets Worse

China’s National Bureau of Statistics said the country’s population grew by just 480,00 people in 2021–a record low increase that brought it up to 1,412,600,000. A decade ago, annual population growth was around eight million. We won’t know for a few more months, but this suggests an absolute decline in population in 2022, the first decline in sixty years.

More importantly, the Total Fertility Rate (births per woman) dropped in 2021 to just 1.15, far below the 2.1 required for a stable population.

Those figures are not encouraging, but the related problems make it even worse. It looks bad as a demographic problem, and it could be worse as a socio-politico problem.

Think of the messaging challenge. Why is every society in the world, and every religion in the world pro-natalist? Why is having children such an important cultural norm? Having children will ruin your health, ruin your finances, and ruin your free time. Indeed, until a hundred years ago or so, there was considerable risk to the mother’s life as well. Only over the long-run do parents see that children can bring enormous joy and sense of fulfillment. So the purpose of these socio-religious norms is to bridge the gap between short-term pain and long-term good news.

But what happens whens this seemingly universal pro-natalist message is shut down, indeed, countermanded? What happens to people’s appetites and plans in this new environment?

We are starting to find out that the Chinese government has been reasonably successful in shutting down the birth rate, but is finding it much harder to reinvigorate it. This demographic challenge is faced by Japan, Korea, and many European countries as well, but we might see it most acutely in China because none of those other societies took the enforcement measures China took to reduce the birthrate. Simply put, no society has ever successfully reversed course on birthrates. China might be the first, but it must grapple with five problems.

First, the new normal. Once people become accustomed to a way of doing things, it becomes their default behavior. Everyone wants a car; you should want a car. Everyone has a small dog; you should have a small dog. Everyone wants to take a trip to Europe; you should take a trip to Europe. Every family is happy with zero or one child; you should be happy with zero or one child. You might have faced legal problems or public criticism for having two children only a few years ago, why would this be your goal today?

Second, victim of success. Mass affluence and mass education have opened the world to China as never before in history. For many people in China, this is the greatest prosperity they have ever experienced, and for the first time they can live life on their own terms.

Third, bureaucratic inertia and exculpatory political culture. The starting point in adopting a new policy is that no one can say the old policy was wrong or harmful. Thus the evolution of policy will tend to lag. Decision-makers have to wait until there is considerable evidence, then policy can be adjusted. There is no sense of urgency, just a desire for ongoing adjustments. China moved slowly to allow for two children, then moved slowly to allow for more than two children, and has yet to move on related issues such as liberalizing IVF, freezing embryos, and single moms.

Fourth, GDP camouflage. For the near term (20-30 years), there will be enough economic growth to offset the damage done by population shrinkage. There will be fewer Chinese, but the total number of Chinese college graduates will grow. The economy will also grow. Covid also adds to this camouflage, allowing policymakers to explain declining marriages, for example.

Lastly, time horizon. Government decision-making is the more difficult when decisions have long-term benefits but short-term costs (just look at efforts in the U.S. to grapple with the budget deficit). No senior government official wants to be the bearer of bad news. If you are a minister, and only a few years away from retirement, are you likely to highlight a problem or are you more likely to minimize it?

So the problem for China is not so much that it is in a bad demographic position. The problem is that it has limited tools and appetite to change its policies. It will do so only slowly, and with incremental efforts.