How China’s population decline will impact the world

For the first time in six decades, China’s population is likely to shrink in 2022.

This could have major implications for the rest of the world.

As the world’s largest country by population, Chinese nationals account for more than 16% of the world’s total population. China is also the world’s second-largest economy, after the United States.

Why is China’s population falling?

China’s population will likely fall in 2022 because the country’s birth rate has fallen to 1.3 births per women in 2020 and 1.5 in 2021. China abolished its one-child policy in 2016, but harsh COVID-19 containment measures have led to families being reluctant to have children in recent years.

Many believe the one-child policy that was in place since 1980 has also led to Chinese residents becoming uncomfortable with having large families – they simply are not used to large families any more.

Billionaire Elon Musk recently brought the China population issue to prominence.

“Most people still think China has a one-child policy. China had its lowest birthdate ever last year, despite having a three-child policy,” he said.

“At current birth rates, China will lose around 40% of people every generation. Population collapse.”

What are the ramifications for the United States and other parts of the world?

Chinese manufacturing has been a major global deflationary force in recent decades. While China has successfully been integrating more higher-value manufacturing and technology industries into its economy, it still relies on its large population to fill millions of manufacturing jobs.

A skills shortage in China, combined with the need to direct more human resources to services sectors such as health care and aged care to cater for an ageing population, will have major implications for the United States and other net importers.

The U.S. will be required to seek imports from other emerging markets – such as India, Southeast Asia or Africa. If the China void isn’t filled, this would ultimately be inflationary for the U.S. domestic economy.

Furthermore, there will be significantly less public infrastructure investment compared to the past six decades – you simply don’t need to build as many roads, apartments and pipelines when the population isn’t growing.

Less manufacturing and infrastructure spending in China will mean countries such as Brazil, Russia and Australia – which export a huge volume of commodities to China – will need to find new markets.

Will China maintain its position as the world’s most populated country?

According to China’s National Bureau of Statistics, China’s population grew by just 480,000 in 2021.

It is now looking likely that India’s population will exceed China’s by 2027. Some demographers even believe it could happen as early as 2023.

India’s fertility rate is currently around double that of China’s.