Jul 3, 2019 - World

Demographics may decide the U.S-China rivalry

Illustration: Aïda Amer/Axios

While embroiled in the most vivid display of great power rivalry since the Cold War, the U.S. and China are both also battling a largely invisible force — relentlessly unfavorable demographics that are sapping their long-term economic vitality.

Driving the news: As we have reported, the global population as a whole is aging and shrinking, but the trend is striking China especially hard just as it challenges the U.S. for long-term global primacy, according to experts and a number of recent reports.

The big picture: For four decades, China has carried out one of the longest, fastest and biggest economic transformations in history. Integral to China's miracle has been its 1-child policy, which has constrained the size of its bulging population. But demographic experts say that, even though 2 children per family are now permitted, the policy has baked in a dire mid-century future for China.

So dramatic are the unfolding trends that they will swamp geopolitics and make China's rise much less certain, argues Nicholas Eberstadt, a demographic expert at the American Enterprise Institute.

  • China's working-age population has been shrinking since 2014, and will lose at least 100 million people by 2040, Eberstadt says.
  • At the same time, the elderly population is exploding in size: By 2050, more than a third of the population — 487 million people — will be over 60 years old, and in need of public support.

The U.S. faces similar demographic problems, including a fertility rate of just 1.7. But they are not as grave as China's since, historically speaking, the U.S. is much more open to immigration. The American working age population is forecast to grow about 10% by 2040.

  • Conversely, China is neither willing to absorb foreigners in large numbers, nor having enough children: Fertility has been below the 2.1-per-couple replacement rate since the 1990s.
  • Chinese fertility averaged just 1.18 between 2010 and 2018, according to a paper earlier this year by Yi Fuxian, a professor at the University of Wisconsin-Madison.
  • In another paper, Yi and a co-author argued that the Chinese population actually contracted last year, much earlier than the 2027-2029 inflection point forecast by most experts.

Put together, the trends — the shrinking, aging and low fertility of the population — will overwhelm the Chinese economy, Eberstadt said. "The age of heroic economic growth is over."

There are steps the Chinese can take: Already, the Chinese are installing industrial robots at a dizzying pace. And Brad Setser, an economist with the Council on Foreign Relations, said China can raise the retirement age and allowing more internal migration by workers from rural areas. "With per capita GDP still only a fraction of U.S. levels, China also still has scope for catch up growth."

But Wang Feng, a professor at the University of California at Irvine, said the demographics ultimately threaten the government's political hold because it will no longer be able to afford social payments to the public.

  • "By our estimates, public spending on basic social welfare provisions, education, health care, and pension, will eat up the entire government fiscal revenue, as its current share of GDP, in the coming decades," Feng tells Axios.

Go deeper: Why population will drive geopolitics

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