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What Does China’s Changing Demographic Mean for Sustainable Development?

CRISIS - Viability of Life on Earth by Man Lok Kwok Asia Mar 21st 202311 mins
What Does China’s Changing Demographic Mean for Sustainable Development?

China is entering an ageing society and seeing the start of its population decline. The rapidly changing demographic will create far-reaching pressures on its economy and society, affecting the nation’s economic growth, social welfare, education, etc. Given that it is still a developing economy with the world’s largest population, the impacts of China’s changing demographic are going to affect the country’s capability to reach the Sustainable Development Goals (SDGs) set by the UN. In this article, we analyse how the changes in China’s demographic would affect its decarbonisation and socioeconomic stability and the potential regional impacts of the nation’s responses to its changing demographic.

China’s Changing Demographic

In mid-January, the National Bureau of Statistics of China released the Chinese economic data for 2022. This includes agricultural and industrial production, export and import data, employment rate, and income level. Among the economic data, the most eye-catching and significant one is the population data of China.
According to the report, between 2021 and 2022 the Chinese population declined by 850,000 (-0.6%) to 1,411,750,000 people. It is the first time since the Great Chinese Famine between 1959 to 1961 that China, the largest populated nation-state, experienced a population decline.
The low fertility rate is one of the greatest contributors to depopulation in China, where population growth has stagnated since the introduction of the “one-child policy” in 1979. Although China revoked the policy in 2015 by introducing the “two-child policy” and further easing the family planning policy by implementing the “three-child policy” to mitigate the ageing population, the fertility rate in the country still remains low, sitting at 1.16, compared to the global average of 2.32 in 2021. China’s fertility rate is even lower than Japan’s, which currently sits at 1.3.
Besides the family planning policy, low fertility rates are caused by a number of socioeconomic factors, including rising costs of living, women’s empowerment, changing social conception of family, and stagnated local economies (especially in the Northeast of the country).
China’s changing demographic has already contributed to the rise of different socioeconomic issues, such as a shrinking labour force and a rapidly ageing population. For instance, the Chinese labour force peaked in 2019 at 795,572,880 before it dropped by more than 4 million in 2021. According to the National Bureau of Statistics, the Chinese working-age population (population between 16-59) peaked around 2014 and dropped by over 40 million between 2010 and 2020, reaching just about 880 million.
The low birth rate and the rapidly ageing population will lead to further population decline and unleash profound impacts on China’s efforts to achieve sustainable development.
According to projections, the Chinese population will drop to 1.39 billion by the end of this decade, 1.34 billion in 2040 and 1.25 billion in 2050. Meanwhile, Chinese aged 60 or above will increase from accounting for 20% of the population in 2022 to 30% (400 million) by 2035. This significant change will transform the socioeconomic landscape of China and restrain the country and nearby regions from achieving sustainable development.

The Spatial Difference of Fertility Rate in China

There are noticeable spatial differences in China’s fertility rate.
According to the 2020 Census Yearbook published by the National Bureau of Statistics of China, regions with higher total fertility rates are concentrated in inland and western provinces with lower development levels like Guizhou, Guangxi, Gansu, Yunan, etc., with a fertility rate ranged from about 1.61 to 2.12. An exception is Xingjiang, where the birth rate dropped from 15.99% in 2009 to only 8.14% in 2019, which could be related to the systematic genocide and forced birth control and sterilisation imposed by the Chinese Communist Party (CCP).
In contrast, coastal and highly urbanised and industrialised regions like Beijing, Shanghai, Tientsin, Heilungkiang, Jilin, and Liaoning have the lowest birth rate in China.
Despite the geographical differences in fertility rates, it should be noted that there also is a huge regional imbalance between the coastal and inland provinces in terms of population. The Aihui-Tengchong Line is an imaginary line beginning in Aihui and ending in Tengchong that was first proposed in 1935, which depicts China’s population density and distribution. In the 21st century, the Line is still relevant to the geographical demarcation of China’s population. Despite accounting for only 43.68% of the surface area of China, over 90% of the Chinese population is still located on the Eastern side of the Line (coastal and urban regions like Beijing and Shanghai).
Therefore, combined with the impacts of rural-urban migration, even though the eastern side of the Line experienced a lower birth rate, the absolute population growth in this area is still higher than in the western side of the country. For instance, as reflected in the China Statistical Yearbook 2022, even though Gansu experienced the highest fertility rate nationwide, the population of Gansu in 2021 declined to 24.9 million compared to its peak of 25.5 million in 2012. Meanwhile, despite experiencing one of the lowest fertility rates in China, Shanghai’s population increased by more than one million people between 2012 and 2021.

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The Ecological Implication of China’s Changing Demographic

A recent study on the household carbon footprint in China conducted by Zhang, Ciu and Zhang discovered that the carbon footprint by different age groups demonstrated an inverted U-shape. Households aged 65 or above have the lowest carbon footprint among all age groups, while middle-aged households have the largest footprint among all groups. The ageing and shrinking Chinese population suggest the reduction of China’s overall carbon footprint, assuming the per capita carbon footprint is unchanged.
In reality, it is unlikely that the ageing and shrinking Chinese population will accelerate the country’s decarbonisation. In contrast, absolute carbon emissions will continue to increase.
By 2021, the urbanisation rate in China was 64.72%, indicating there is huge room for further urbanisation. According to the Report on China’s Population and Labor No.22 published by the Chinese Academy of Social Sciences in 2021, the expected urbanisation rate in China by 2035 will be 72.67% to 76.91%, with a yearly increase of 0.58% to 0.87%. Based on this calculation, assuming that 1.415 billion inhabit China, the urban population by 2035 will increase by over 100 million to about 1.057 billion. The newly added urban population will inevitably increase the carbon emission and footprint from China.
Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and Vision 2035 of the People’s Republic of China further illustrated the distribution of newly urbanise areas until 2035. According to the Outline, the Chinese government will ease some restrictions for rural-urban migration and aim to boost the rural population to integrate into cities. Additionally, the Outline proposes accelerating the Great Western Development Strategy and developing multiple vital technological innovations and economic centres in the region.

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Numerous studies have examined the Chinese rural-urban disparity in environmental footprint. For example, World Bank’s research on urban and rural municipal solid waste in China identified that the average municipal solid waste generated by Chinese urban areas is about 27% higher than the rural areas (1.1 kg per capita compared to 0.8 kg per capita). Moreover, according to the same research by Zhang, Ciu and Zhang, carbon emissions from urban areas ranged from about 6-8.2t per household. In comparison, rural household emissions only ranged from about 2.5-4t per household.
Although the carbon footprint gap between rural and urban household decrease with age, the development plan for inland regions and projected urbanisation growth rate suggested that the growing environmental footprint in these regions will outgrowth the environmental footprint reduction caused by the ageing population, given the resource-intensive lifestyle of urban areas.

Impacts on China’s Economic and Social Sustainability

The shrinking and ageing population in China will hinder economic stability and growth. Since the 2010s, the nation has been shifting from a manufacturing-based economy to an innovation-driven one (see, for example, the Made in China 2025 plan). While the transition toward an innovation-driven economy is fruitful, proven by the leading role of China’s photovoltaic, wind turbine, and EV battery technology on a global level, the continuous economic transformation requires steady monetary inputs for Research and Development (R&D) and training. The demographic transition will destabilise China’s tax base, leading to declining tax revenues, increasing government expenditure for eldercare or pension, and fiscal imbalance.
A study on demographic change and public education spending in Switzerland calculated the data between 1990 to 2002 obtained from the official Swiss Federal Statistical Office and conducted by Grob and Wolter observed that the ratio of the elderly population has a significant negative impact on the average spending on education per student. Although the case of Switzerland might not be transferable or different in China, the recent protest by the elderly population over the slash in healthcare benefits indicates that the competition for financial resources between different generations might prevail. Recent research on the impacts of China’s population ageing on public education expenditure discovered a 1% increase in the old-age dependency ratio would lead to a 0.304% decrease in local public education financial expenditure. Although the research also found that a 1% increase in the urbanisation rate would lead to a 0.215% increase in local public education financial expenditure, the impacts from the rising old-age dependency ratio will outperform the positive impacts on public education financial expenditure from the nation’s urbanisation. China’s old-age dependency ratio will rise from 18.8% in 2021 to 58.8% by 2050; meanwhile, the expected urbanisation rate in 2050 will be about 80%, up from 64.72% in 2021.
Combined with the strong association between the ageing population and slower economic growth in China, the rapid ageing and shrinking population will reduce China’s tax revenue and become a huge obstacle for China in meeting Sustainable Development Goal 4 (SDG 4) – Quality Education, and SDG 8 – Decent Work and Economic Growth. With less educational input from the government, China might not be able to keep up with the capital required to transition into a high-value-added innovation-led economy and fall into the middle-income trap as Southeast Asia and South America experienced since the 1990s.
Secondly, the ageing and shrinking population might intensify elderly poverty, which challenges China to achieve the SDG 1 – No Poverty, and SDG 10 – Reduced Inequalities. Because of the low labour participation rate of the elderly population, this demographic group highly depends on family support, social welfare, healthcare, and pension to support their quality of life. For instance, China’s National Rural Pension Program is associated with the growth of earned and total income and lowers the opportunity for the elderly to fall into poverty. The slower growth rate, shrinking labour force, correlated tax revenue reduction, and competition for resources from different sectors create a substantial financial burden on the government budget. With the growing demand for eldercare and benefits, China’s state pension fund could run dry as early as 2035.
The examples above show that demographic change is a far-reaching socioeconomic issue that has detrimental impacts on China’s path of achieving the SDGs. The aforementioned elderly protest of the cut in healthcare benefits shows that the elderly population is most vulnerable to changes in the welfare system. The potential welfare reduction further indicated that the failure to meet SDG 8 and SDG 1 would spill over SDG 3 – Good Health and Well-Being, which deteriorates the quality of eldercare coverage and quality.

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Impacts on China’s Foreign Policy and Nearby Regions

SDG 16 aims to achieve “Peace, Justice and Strong Institutions” and “reduce all forms of violence and related death rates everywhere.” Currently, there are limited studies focusing on the correlation between the ageing or decreasing population in China and international conflict. However, the power transition theory might provide some hits to the potential impacts of demographic change on China’s foreign policy.
The Power Transition Theory is a theory in international relations that focuses on the nature of international conflicts. It predicts that conflicts occur when the great power or the dominant power perceives its decline (both relative power and absolute power). The theory places territory and demographic size as a vital fundamental element of national power and anticipates that a rising great power caused by rapid economic development will disrupt the balance of power and challenge the regional and international hegemony to alter the international systems to better serve their national interests.
Based on the prediction of this theory, the declining population and the corresponding decline of national power will encourage China to engage in aggressive or riskier foreign actions toward less powerful states (i.e. Taiwan) while it still has the capability to do so. China became a regional hegemony in Asia and a great power at the global level in 2010 when China’s GDP surpassed Japan’s and became the second-largest economy after the United States. The unprecedented growth in China’s national power over the past few decades was hugely attributed to its population size. The potential socioeconomic issues correlated to the demographic issues will inevitably affect China’s national power (e.g. military investment and size, economic situation).
Jennifer Sciubba’s research on the impacts of the shrinking population in Russia on Russian foreign policies discovered that Russia was aggressive diplomatically (e.g. invasion of Georgia and Ukraine) when its population decline peaked. Utilising the Power Transition Theory, Sciubba gave two explanations for the Russian foreign and diplomatic aggression while experiencing the shrinking population. First, Russia’s diplomatic aggressions at the UN are attempts to shift the balance of power in the international system to create a favourable environment for its future. Second, Russia’s military invasions against its inferior neighbour is a mean for Russia to exercise its influence and power while it still can.
Taiwan and South East Asian Sea are two of the most vulnerable regions to face potential military aggression from China, given their political and economic importance for China’s future (besides its abundant natural resources, South East Asian Sea is an essential route for China’s Belt Road Initiatives). Combined with a higher tendency of a sex-ration imbalance country to engage in internal or international violence conflicts, the shrinking and ageing Chinese population suggests that China may follow the path of Russia to engage in more aggressive diplomacy and foreign policies. As these changes in population will have detrimental impacts on China’s national power and the core role that Taiwan plays in China’s rejuvenation, the country might seize the remaining opportunity to implement its plan to annex Taiwan in the near future while it still has the capability.

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The interconnectedness between population size and economic growth is one of the causes of China’s potential vulnerability. While the Chinese government is betting on the dual circulation policy to prioritise growing the domestic market, it will be essential for China to expand its high-value-added export-oriented industries to maintain China’s economic growth rate at the age of population decline. Further expansion in the overseas market allows China to widen its trade surplus, reach the global market and accumulate foreign exchange reserves. As the ageing population in developing Asian countries might not significantly contribute to strong consumption and domestic demand, focusing on the domestic market under the dual circulation policy might not be enough to sustain China’s economic growth rate.
The examples above show that demographic changes could affect China to reach the SDGs. The vulnerabilities of China in an ageing era also reflect those of many developed ageing societies. While developed economies like South Korea, Japan, Germany, and Italy have better capability to withstand the socioeconomic shocks of demographic change, many developing countries are experiencing unprecedented ageing speed and do not have the financial and institutional capacity to overcome the challenges of demographic change. The limited attention on the relationship between demographic change and sustainable development in developing economies may intensify the social and economic unsustainability and result in social inequality, economic stagnation, and increased poverty in societies that contradict the Leave No One Behind” principle of sustainable development.

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