China’s demographics aren’t a short-term problem

In discussions about China’s economy, the issue of demographics comes up quite a lot. In 2022, China’s population began to decrease (and coincidentally, India’s population surpassed China’s). The country’s fertility rate, which had already fallen below replacement levels decades earlier, fell again recently, to just 1.09 — one of the lowest rates in the world, and even lower than Japan.

This is prompting a lot of hand-wringing about the future of China’s economy, both from people within China and from foreign observers. For example, here’s a quote in the WSJ:

Here’s The Economist:

And here’s the most dire post I could find, from The Conversation:

Now, I absolutely do think this is a problem for China in the long term. In fact, China is far from unique in this regard — every developed country is aging rapidly, and most developing countries aren’t far behind.

And there really are negative consequences to population aging. I wrote about those problems in this post.

In fact, the shrinking of the population isn’t actually the problem — it’s the aging. Rising old-age dependency ratios do put a huge economic burden on working people, and an aging workforce probably does reduce innovation and productivity growth. This is true despite automation. A world top-heavy with old people will be a world where young people have to toil harder and harder, all over the globe.

But in the short term, I think the catastrophizing over China’s demographics is overdone. Americans searching desperately for a reason to dismiss China’s competitive threat might be tempted to seize on the country’s low fertility. But China’s economic might is not going to go “poof” and disappear from population aging; in fact, as I’ll explain, it probably won’t suffer