China Research

A discussion forum on emerging markets, mainly China – from a macro, micro, institutional and corporate angle.

Demography – China’s biggest problem?

April 10, 2024

China had until recently a couple of decades with impressing GDP-growth numbers. However, this development was not possible without pain and flipsides such as poor environment, credit bubbles, real estate crises, massive local indebtedness, enormous subsidies to state-owned enterprises, etc. 

These burdens are still there – certainly dampening ongoing and future economic growth. Despite lacking transparency – also when it comes to real GDP growth – the world outside China is now much more aware of China’s structural growth problems than before the eruption of covid-19. 

However, one major Chinese structural challenge is still widely neglected or forgotten in Western countries, particularly in commercial circles – the rapidly deteriorating demographic conditions.

300 million Chinese pensioners

China’s population amounted in 2023 officially to 1.41 billion – only slightly behind India after having been the number-one country by population during many years (India in 2023: 1.43 billion).1.41 billion meant a population decline for the second year in a row. In 2022, Chinese authorities noted also the first population drop since 1961.

India’s move to the top of global population or – in our context – China’s fall from the very top to the second position can be explained in three interconnected ways:

¤ First, by India’s clearly younger population.

This fact also means that India’s demographic perspectives point at a much more favorable population outlook than in the case of China; probably also as regards long-term GDP growth (if the younger Indian people will be provided with necessary education).

¤ Second, by China’s perennial one-child policy.

After 35 years of one-child policy, Chinese political leaders finally allowed couples in 2015 to have two children, since 2021 even three. In my view, 2015 was at least ten years too late for tackling the forthcoming demographic challenges. It should have happened strategically in the early days of optimism and rapidly increasing economic growth.

¤ Third, slowing GDP growth tends to counteract increasing birth rates. 

This experience from our part of the world can also be applied to today’s China. Couples think in worsening economic times more frequently that they cannot afford (further) children. More concretely, the fertility rate fell in 2023 to just one child, mainly due to worsening conditions on the labor market – e.g. for young academics! – and increasing financial uncertainty of private households. Before covid-19 the corresponding ratio was still at 1,50. Urbanization should have contributed to the declining fertility as well.

Altogether, the demographic trends in China seem to be extremely challenging, particularly since the population above 60 years already includes as much as almost 300 million people and is calculated to go on growing quickly in the future. Furthermore, longevity should be rising further.

Thus, one can easily recognize that a lot of different tensions and imbalances are hidden behind the Chinese age pyramid. In 2002, there were still ten working people on one pensioner. For 2030, the corresponding numerical relation will be four working people by one pensioner, even lower ratios are mentioned by researchers.

We can foresee that China really is facing dramatic demographic changes that are predicted to continue into the wrong direction for some decades beyond 2030. China’s total population is estimated to shrink below 4 billion already ten years from now. Researchers at the Australian Victoria University forecast as well that the number of Chinese working people will be equal to all retirees around 50 years from now – indeed a scaring scenario (

50 years is, of course, a very long time horizon for a forecast. In the meanwhile, developments may turn to the worse or to the better. Considering all imbalances in the Chinese economy, however, it looks hard to recognize a less gloomy demographic outlook already in the forthcoming 10-20 years, since demographic trends for such a limited demography period tend to be fairly predictable – at least what concerns the direction.

What could be done?

Here we certainly have a question that many – or even most – Chinese focus on these days. But reality of the demography mystique and its cure is extremely tough as the theoretical examples of possible action manifest below.

¤  Raising the age for retirement.

This could be an alternative forward, particularly since Chinese men usually retire from their jobs already at 60 years of age and working women at 50 (factory workers) or at 55 (white collar). However, many observers consider such a step psychologically and socially as risky and economically as insufficient to solve the whole demographic problem though intentions in such a direction already have been addressed. Certain experts claim even that Chinese decision-makers have no choice anymore and simply have to raise the age for retirement – whatever it takes. But it should be added that enterprise employees already work as much as 49 hours a week.

¤  Improving the conditions for the three existing insufficient pension pillars.

Improvements of the governmental, the voluntary corporate and the voluntary private pension pillars have been discussed in different Chinese fora – but do definitely not look promising because of huge capital shortage in all three pension regimes. For fiscal reasons, China should indeed refrain from rapidly rising public debt.

¤  Generally: economic policy aiming at (considerably) higher GDP growth.

It remains a conundrum how such an objective could be met when the labor force as a main growth factor will be shrinking faster. Sure, the political leaders want to see more high tech and value-added in production. But I cannot imagine how this could take place in a satisfactory way with the scarce future labor market resources. Considerably more automation in production seems to be only a partial approach. Heavy application of AI remains a potential joker – but also an unpredictable one.

¤  Specifically: economic reforms as intended by the Third Plenum in 2013.

Sticking more ambitiously again to these growth-stimulating plans with more market economy and better institutional conditions would certainly be a good GDP-growth idea – but most probably not sufficient to provoke a desirable GDP boom (but better than the current course of economic policy).

¤  Labor force immigration

This is not a realistic option for China – neither theoretically nor practically (where should all the needed people come from?).

Conclusion: Having checked out different Chinese alternatives for tackling the demographic challenges in the forthcoming two or three decades to start with, I could not find any promising and simultaneously realistic way to manage the forthcoming demographic crisis successfully – particularly not under current policy conditions.

In my opinion, not even a combination of higher retirement age and better structural conditions for GDP growth would completely solve the demographic crisis – in the most favorable scenario most probably only dampen the negative consequences after quite some years.

Hopefully, I am too limited in my optional thinking. Of course, the world would benefit from a better outcome from China’s demographic dilemma than it is singled out in this article (see also

Companies should deepen their analysis

Indications are strong that Western corporations already in the forthcoming decade – and also beyond – will be confronted with declining potential growth in China. The demographic burden looks much heavier than most corporate managers seem to anticipate these days.

China’s current political strategy to boost private consumption could fail drastically when/if pensioners will have growing financial problems, and the working people increase their savings ratio because of concerns about their financial future. Psychology will play a major role in this context. It cannot be ruled out that China’s demographic challenges may mean a bigger threat to Western companies in the longer run than China’s wildly expected progress in AI and modern technology.

Summary – more focus should be put on demographics

¤  It seems to be a good advice to Western commercial strategists to follow demographic developments in China in the forthcoming decade(s) very carefully in order to find an appropriate China analysis and strategy.

¤  Western companies need a real long-term strategy for China – not only for the next few years – with the demographic challenge as a major parameter.

¤  However, everything written in this article deals by definition with an uncertain future. I therefore wish all readers to apply all above mentioned forecasts and scenarios on China’s demographic challenge with necessary circumspection and humility – though the enormous challenges are obvious.

Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

India – Modi wants to win the election and act as the voice of the South

March 26, 2024

One month from now – on April 19 – general elections will start in India and include altogether seven stages until June 1. Almost one billion people are invited to vote – 150 million people more than last time.

Opinion polls point at a new victory for current Prime Minister Narendra Mori and his Hindi right wing Bharatiya Janata Party (BJP) together with BJPs coalition partners (see my article from February 22 this year with the title “India isn’t easy to analyze and to deal with”, including comments on the economic development and challenges, Most observers expect the oppositional alliance called INDIA to weaken the position of the BJP – but not strongly enough to win.

Strengthening India’s voice of the South

There is no doubt that Modi during his assumed third mandate period aims at further strengthening India’s role as voice of the South, certainly in competition with China. Both countries appear to be quite different in their political approach vis-à-vis the southern world.

India seems to see the South in a collective view with visions of necessary common achievements in important areas such as less poverty, better health and environment but also non-violence in Gandhi’s historical spirit.

More exactly, the Indian government made the following comment in this context: ”India hosted a special virtual Summit, called the Voice of Global South Summit under the theme – ‘Unity of voice, Unity of purpose’ from January 12-13, 2023. It was a new and unique initiative that envisaged bringing together countries of the Global South and share their perspectives and priorities on a common platform across a whole range of issues…”.

India obviously strives to integrate the global South more visibly with the Western hemisphere – in line with its philosophy to see the whole world as one family (Vasudhaiva Kutumbakam).

China’s strategies on the other hand tend to base quite openly on commercial objectives, for example by producing and financing new infrastructure projects and by receiving in return access to important commodities or Taiwan issues. However, China also uses, for example, BRICS and the trade agreement RCEP as platforms for meeting the South multilaterally.

It may be interesting to see how India and China will compete in the South in the longer run. It seems to be on the cards that this competition will become fiercer.

Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

China – what will the NPC announce?

March 4, 2024

On March 5, the 14th National Party Congress (NPC) will officially open its second convention. This time, the NPC deserves particular attention.

Main focus for analysts – the officially strived GDP growth              

This year’s NPC procedures will be the same as every year.  Almost 3000 representatives from all over the country participate in this annual “parliamentary” convention of the Communist Party in Beijing – a convention  with a normal acceptance rate for all suggestions and laws of 100 percent (see also my remarks from last year, edited on March 6, 2023,; many of the comments then should be still valid, particularly those that pointed at the economic imbalances).

One year ago, I wrote that “the officially proclaimed official GDP-growth objective of around 5 percent in 2023 surpasses the outcome of 2022 by as much as 2 percentage points. 5 percent may not be quite easy to achieve but is definitely not out of reach because of all the (possible) statistical GDP effects from the low base in 2022 and a more expansionary economic policy this year”.

This interpretation has come true. Officially, last year’s GDP came in with a growth rate of 5.2 percent. It could have been lower in reality. Economic policy has become more expansionary, also in the past few weeks. Chinese political leadership still seems to be concerned about the economic performance.

There should be every reason for political growth concerns even if we do not know enough about China’s current economic situation. But we seem to understand that China these days is at the edge of deflation. The property crisis is still there – affecting also local public debt.

Real estate is no longer driving the economy. This explains partly the ongoing reluctance of consumers – but also the disappointing performance of Chinese stocks. Purchasing Manager Index for manufacturing stayed in February again below 50 (but may have been slightly affected by the new year vacation).

The important role of confidence

Lack of confidence in the economy can currently be observed both inside and outside China. For this reason, Prime Minister Li Qiang will put a lot of emphasis on restoring confidence and go for another 5-percent growth target in 2024 (which in reality should be more difficult to meet than one year ago).

Consequently, short-term stimuli will receive more political attention than structural economic policy. However, such a short-term focus will not work without further expansionary policy steps in fiscal expenditure and credit policy. This could mean further uncertainty about official and implicit public debt – a conundrum that has been existing for many years (see Fromlet;jsessionid=C0C89C49F078C34335DF6EBFA637B523?sequence=19).

Hubert Fromlet Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board