China's population decline does not spell doom

Demography is not destiny. Broader economic reforms that allocate capital better and make labour more productive can blunt the impact of a shrinking population.

- Bert Hofman

It is no surprise that China's National Bureau of Statistics' (NBS) quarterly press releases on its gross domestic product (GDP) statistics are closely followed. After all, it is the second-largest economy in the world - the largest on some count - so much is at stake.

On Tuesday, though, it was not the reported 3 per cent growth rate for 2022 that stole the show, but a number from a normally obscure part of statistical work, demographics.

For the first time since the Great Leap Forward, Mao Zedong's disastrous development experiment that resulted in a famine that killed tens of millions in China, the NBS reported a decline in the country's population. It was a small decline, at 850,000, or less than 0.06 per cent of the population, but a decline nevertheless signifying the end of an era. It is likely that India, not China, will soon be the most populous country in the world.

News agencies and newspapers jumped on the number. "China's first population drop in six decades sounds alarm on demographic crisis" headlined Reuters; "China's population falls, heralding a demographic crisis", wrote The New York Times. The fear (or hope) among many observers is that China's demographic decline spells doom for its economic growth, its real estate sector, pension and health systems, and even, as Chinese business magazine Yicai pointed out, for the sales of baby formula. Comparisons with Japan after the collapse of its asset bubble in the 1990s, which coincided with a demographic turning point, have also been made.