Why China’s shrinking population may be a blessing, not a curse

There is little in common between Daron Acemoglu and Xi Jinping. As a strong advocate of the Western model of liberal democracy, Acemoglu, co-recipient of the 2024 Nobel Prize in economics, may be considered the ideological opposite of the Chinese president.

But on a crucial point about China’s future, the two may, strangely, be on the same page: an across-the-board introduction of cutting-edge technology may enhance productivity and maintain economic growth. It may counteract the negative impact of drastic population decline in the decades ahead.

While that may be an emerging consensus among economists and other social scientists, it still runs counter to the popular narrative that a rapidly greying China is doomed. The official figures released in January, for example, set off alarmism. China’s population fell by 3.39 million last year to just over 1.4 billion – a fourth consecutive decline and the steepest so far. Births dropped by 17 per cent to 7.92 million, the lowest since records began in 1949. Roughly 323 million Chinese, close to a quarter of the population, are now over 60.

The reaction was swift and familiar: China will grow old before it grows rich, its workforce will hollow out, its pension system will buckle, its ascent will end.

Some concerns are warranted. If 2.1 children per woman is the population replacement rate, then those countries with the lowest birth rates – China at 0.63, Japan at 0.6, and South Korea at 0.46 – are projected by 2050 to experience population declines of 20-30 per cent relative to 2023; their share of the population aged 65 and over to reach 30-40 per cent; and older workers (aged 45 and over) to comprise 60 per cent of the labour force.

What might China do to address its record low birth rate and declining population?

But that’s not the whole story. In fact, much of it is missing, and the alarm has outrun the analysis. “What if the historical evidence tells us that collapsing birth rates, paradoxically, are good for the economy,” economist Joeri Schasfoort asks in his YouTube channel, “because they force companies to innovate?”