China’s population shrinks again and is set to more than halve – here’s what that means

Xiujian Peng, Victoria University

China’s population has shrunk for the second year in a row.

The National Bureau of Statistics reports just 9.02 million births in 2023 – only half as many as in 2017. Set alongside China’s 11.1 million deaths in 2023, up 500,000 on 2022, it means China’s population shrank 2.08 million in 2023 after falling 850,000 in 2022. That’s a loss of about 3 million in two years.

The two consecutive declines are the first since the great famine of 1959-1961, and the trend is accelerating.

Updated projections from a research team at Shanghai Academy of Social Sciences, one of the first to predict the 2022 turndown, have China’s population shrinking from its present 1.4 billion to just 525 million by 2100.

China’s working-age population is projected to fall to just 210 million by 2100 – a mere one-fifth of its peak in 2014.

Deaths climbing as births falling

The death rate is climbing as an inevitable result of the population ageing, and also an upsurge of COVID in the first few months of 2023.

The population is ageing mainly because the birth rate is falling.

China’s total fertility rate, the average number of births per woman, was fairly flat at about 1.66 between 1991 and 2017 under China’s one-child policy. But it then fell to 1.28 in 2020, to 1.08 in 2022 and is now around 1, which is way below the level of 2.1 generally thought necessary to sustain a population.

By way of comparison, Australia and the United States have fertility rates of 1.6. In 2023 South Korea has the world’s lowest rate, 0.72.

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Births plummet despite three-child policy

China abandoned its one-child policy in 2016. In 2021 the country introduced a three-child policy, backed by tax and other incentives.

But births are continuing to fall. In part this is because of an established one-child norm, in part because the one-child policy cut the number of women of child-bearing age, and in part because economic pressures are making parenthood less attractive.

China’s National Bureau of Statistics says employees of enterprises work an average of 49 hours per week, more than nine hours per day. Women graduates earn less than men and are increasingly postponing having children.

The Year of the Dragon offers hope

One hope is that 2024 will see a bump in births, being the year of the dragon in Chinese astrology, a symbol of good fortune.

Some families may have chosen to postpone childbirth during the less auspicious year of the rabbit in 2023. At least one study has identified such an effect.

An older, more dependent population

The same research team at the Shanghai Academy of Social Sciences and the Centre for Policy Studies at Australia’s Victoria University have China’s population falling by more than one-half to around 525 million by 2100, a fall about 62 million bigger than previously forecast.

The working-age population is set to fall more sharply to 210 million.

We now expect the number of Chinese aged 65 and older to overtake the number of Chinese of traditional working age in 2077, three years earlier than previously.

By 2100 we expect every 100 Chinese of traditional working-age to have to support 137 elderly Chinese, up from just 21 at present.

Our central scenario assumes China’s fertility rate will recover, climbing slowly to 1.3. Our low scenario assumes it will decline further to 0.88 over the next decade and then gradually recover to 1.0 by 2050 before holding steady.

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We have based our assumptions on observations of actual total fertility rates in China’s region and their downward trend. In 2022 these rates hit 1.26 in Japan, 1.04 in Singapore, 0.87 in Taiwan, 0.8 in Hong Kong and 0.78 in South Korea.

In none of these countries has fertility rebounded, despite government efforts. These trends point to what demographers call the “low-fertility trap” in which fertility becomes hard to lift once it falls below 1.5 or 1.4.

An earlier peak in world population

At present accounting for one-sixth of the world’s population, China’s accelerated decline will bring forward the day when the world’s population peaks.

Our updated forecast for China brings forward our forecast of when the world’s population will peak by one year to 2083, although there is much that is uncertain (including what will happen in India, now bigger than China, whose fertility rate has fallen below replacement level).

The accelerated decline in China’s population will weaken China’s economy and, through it, the world’s economy.

It will put downward pressure on Chinese consumer spending and upward pressure on wages and government spending. As the world’s second-largest economy, this weakness will present challenges to the world’s economic recovery.

Xiujian Peng, Senior Research Fellow, Centre of Policy Studies, Victoria University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Read More........ → January 18, 2024

Belt and Road Initiative’s new approach and what it means for Chinese investments in Indonesia

The Jakarta-Bandung high-speed train, the first in Southeast Asia, was funded by China as part of its decade-old Belt and Road Initiative (BRI) project. ANTARA FOTO/Hreeloita Dharma Shanti/sgd/aww Ahmad Syarif, Johns Hopkins University

A shift in China’s international Belt and Road Initiative (BRI) from focusing on massive projects such as roads, railways and ports to “small but beautiful” ones has been announced by President Xi Jinping.

Launched in 2013, the initiative provides loans to build infrastructure in partner countries worldwide, with connectivity as its main focus.

Indonesia is BRI’s biggest recipient in Southeast Asia. The initiative has helped the country finance Southeast Asia’s first high-speed train project and poured billions of dollars of investment into nickel processing, unlocking a critical mineral asset.

As a scholar in political economy and a former government relations consultant working closely with the Indonesian business sector, I’ve been considering what the “small-but-beautiful” approach means for Chinese investment in Indonesia.

What does “small-but-beautiful” BRI mean?

This shift in BRI strategy signifies a focus on projects that are of a smaller scale more efficient and less risky. It is a sensible move for China, considering the global economic slowdown, the country’s moderating domestic economy, and trade tensions with the US.

It is also an attempt to repair China’s global image, amid fears it is seen as a loan shark. Several countries, such as Zambia and Sri Lanka, have already gone into default. China’s reputation will suffer if too many countries fail to pay debts.

Defaults are a liability for the BRI cash flow and the Chinese economy. Beijing should find reliable debtors with solid and promising economic performance. That is precisely what Beijing sees in Jakarta: stable politics, a growing domestic market and pragmatic economic policies.

Chinese state investment in Indonesia

China’s state-driven investment in Indonesia focuses on public infrastructure project run by Indonesian state-owned enterprises and funded by Chinese state-owned lenders. The Jakarta-Bandung high-speed train is an example of China’s investments in Indonesia.

Indonesia received a loan from the China Development Bank for the project and began construction in 2016. The project hit a US$2 billion cost overrun due to problems in its land acquisition and feasibility study.

Due to the ballooning costs, China asked for financial reassurance from the Indonesian government. This prompted the use of the state budget the public having been promised that the project would not touch any government funds.

This might set a precedent for future Chinese investment requiring state collateral – especially given Indonesia’s plan to persuade China to invest in Indonesia’s new capital project in East Kalimantan.

Indonesia has asked China to chip in to the US$35-billion project, which has struggled to secure investment. There has been no formal answer from the Chinese on the request thus far. However, investing in the new capital – which is far bigger and riskier than the high-speed railway project – does not fit the “small-and-beautiful” approach due to its high risks.

China may still opt to invest in the mega-project, but a more modest input seems more likely. And as part of risk sharing, Indonesian government collateral will be likely critical for its willingness to invest.

The Chinese private sector

While Chinese state-owned firms focus on funding public infrastructure projects, its private sector is more profit-oriented. This means that changes in BRI – which now emphasises more on less risky, bankable projects – is unlikely to affect Chinese private investment in Indonesia.

One of the critical projects between the two countries’ private sectors is a joint venture between Tsingshan Holding Group Company Limited, the China-based biggest private investor in nickel processing, and Merdeka Copper and Gold.

Close relationships with domestic tycoons have helped Chinese private sector firms navigate Indonesia’s planning rules and guide the engagement with the country’s domestic politics.

Chinese private companies such as Tsingshan are also backed by their state-owned firms in their Indonesian ventures. The Morowali Industrial Park in Central Sulawesi, Tsingshan’s most prominent project and the largest nickel processing park in Asia, is funded with loans from Chinese state-owned banks. The park’s processing technology contractor is mainly run by a Chinese state-owned subsidiary.

The Chinese state-owned companies find Tshinghan and other Chinese private sector operators successful in navigating their investment in complex and highly political sectors such as natural resources and critical minerals processing due to their strong links with Indonesia’s powerful politicians and business people.

Chipping in via profit-oriented projects run by private companies makes more sense for some Chinese state-owned firms than being directly involved in Indonesia’s public infrastructure projects. The investments driven by Chinese private sectors are relatively more risk-averse and commercially sound.

In the future, we will likely see a continuing trend of Chinese private sectors, supported by their state-owned firms, partnering with domestic business groups to invest in Indonesia’s profitable critical minerals and other sectors.

Ahmad Syarif, Doctor of International Affairs candidate, Johns Hopkins University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Read More........ → December 14, 2023

China’s Xi fights fires at home and abroad

A Chinese official adjusts a Chinese flag before the start of a meeting between Foreign Minister Wang Yi and Indian Foreign Minister Sushma Swaraj in New Delhi, India, December 21, 2018. REUTERS/Adnan Abidi/File Photo

On a host of fronts, China’s domineering leader seems to be fighting fires. Abroad, President Xi Jinping is confronted by a hardening consensus against Beijing in the West, as well as ever-present friction with regional powers and neighbors. At home, Xi presides over a hinge moment for the Chinese economy. Its meteoric growth has slowed, a brief post-pandemic surge petered out, and analysts point to profound structural issues undermining China’s future prospects.

Xi and the ruling clique are struggling to address the new challenges posed by China’s maturing economy. The country’s population is both shrinking and aging, and questions loom over the potential productivity of a graying workforce. At the same time, youth unemployment has reached such striking levels that the government suspended publishing the relevant data this summer. China’s economy once seemed the new engine of the world – and the country remains a juggernaut in global trade – but a sense of stagnation is creeping in, one that can be seen in the macroeconomic data as well as the waning optimism of a younger generation that knew only the boom times.

China’s one-party state can’t repeat the mammoth stimulus for infrastructure projects and property construction that powered China out of the 2008 global financial crisis and allowed Xi and his allies to crow about the superiority of the Chinese model compared with the West’s crisis-hit democracies. A decade and a half later, cash is tighter, the wounds of the pandemic’s draconian lockdowns are still raw, and China’s overheated real estate sector is extra laden with debt, with some major developers teetering on the brink of collapse.

Xi’s ever-tightening authoritarian grip over virtually all facets of life in China is arguably making the situation worse. “The government’s pursuit of total control has set the country on a path of slower growth and created multiplying pockets of dissatisfaction,” wrote Ian Johnson, a senior fellow at the Council on Foreign Relations and a longtime China watcher.

There are ripple effects on the world stage, too. “The current slowdown underscores a shift in China’s global image,” explained my colleague David Lynch. “For years, China’s vast domestic market beckoned multinational corporations with the promise of enormous profits. And it seemed certain to surpass the United States as the world’s largest economy.”

But now, “the outlook is less rosy,” with China posting a considerably sluggish performance in the second quarter given the pace-setting dynamism of its economy over the past three decades.

This may not be a blip, as Beijing weathers considerable geopolitical head winds. On a trip to China last week, U.S. Commerce Secretary Gina Raimondo warned that the prevailing uncertainty, stoked also by the tough actions taken by the Chinese government against foreign businesses, is making China “uninvestable” in the eyes of U.S. investors.

“China needs to recognize that they can no longer rely on the sheer mass of their market to attract that type of foreign investment,” Naomi Wilson, vice president of policy, Asia and global trade at the Information Technology Industry Council, told my colleague Meaghan Tobin. “Even among Chinese companies, there have been efforts to relocate outside of China.”

Recent surveys of global public opinion find largely negative views of China’s influence in international affairs, including in some middle-income countries outside the West. In Asia, the United States has steadily bolstered a web of alliances and partnerships with China’s neighbors, bonds being strengthened directly out of concern for China’s increasingly aggressive behavior.

Chinese officials resent the implication that their state – rather than what they see as the overweening U.S. hegemon – represents a threat to stability and order. But Beijing can’t seem to help itself. The recent state publication of a map that claims chunks of territory in neighboring nations, including India, triggered a diplomatic spat with New Delhi that preceded news that Xi will not attend this week’s meeting of the Group of 20 major economies, hosted in the Indian capital.

Xi’s apparent approach to the moment has been to double down on his hard-line nationalist instincts. Long gone are visions from a decade ago, when some experts imagined that China’s leaders would steer the country’s economy to a more liberalized, market-oriented future. Instead, Xi, an aloof supremo with the license to rule for life, has embarked upon rounds of radical purges and crackdowns that have affected the ranks of China’s political elites and its private sector.

Chinese tech companies hemorrhaged hundreds of billions of dollars in value in recent years. Capable technocrats in prominent posts were replaced with Xi loyalists. Managers and business executives in state-run companies are compelled to study and expound upon the virtues of “Xi Thought,” in a nod to the more doctrinaire, Maoist past. For Xi, centralized authority and control is paramount.

That reflects Xi’s weakness. “Whereas Mao Zedong and Deng Xiaoping enjoyed prestige from their revolutionary pedigree and exploits in establishing the ‘New China,’ Xi has no personal legitimacy independent of the Communist Party,” Chun Han Wong, author “Party of One: The Rise of Xi Jinping and China’s Superpower Future,” said in a recent interview. “His right to rule is inextricably linked with the party’s legitimacy, and his power cannot be separated from the party’s political machinery.”

But what may be good for the party may not be good for the country. “These economic problems are part of a broader process of political ossification and ideological hardening,” Johnson wrote in an essay in Foreign Affairs. “For anyone who has observed the country closely over the past few decades, it is difficult to miss the signs of a new national stasis, or what Chinese people call neijuan. Often translated as ‘involution,’ it refers to life twisting inward without real progress.”

That malaise may have profound implications in the years to come. “So far nobody can challenge [Xi] politically,” Ling Chen, an assistant professor at the School of Advanced International Studies at Johns Hopkins University, told my colleague Christian Shepherd. “But economic performance is always the very core of the regime’s legitimacy and that affects how well he can govern the country.”“Things always fail slowly until they suddenly break,” William Hurst, a professor of Chinese development at the University of Cambridge, told Reuters, warning of potential financial crises to come that may have steep social and political costs. “Eventually there’s going to have to be a reckoning.”China’s Xi fights fires at home and abroad

Read More........ → October 16, 2023