Will China’s Low Birth Rate Jolt The Global Economy?

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China, the world’s most populous country, may soon run out of labour as reported by Business Insider.

Economic status

It’s been a rocky year for the Chinese economy, what with the Evergrande crisis and COVID cases shutting down ports.

It could have dire consequences for China in the coming decades and could even reshape the world, as the problem stands to destabilize a key engine of global growth.

It could even push up worldwide inflation.

China’s birth rate hit a record low last year, according to data released by the country’s Bureau of Economic Statistics towards the end of November, with just 8.5 births per 1,000 people. That was the lowest since the data set started in 1978, and is likely the lowest since the 1940s.

At the root of the problem is China’s decades-old one-child policy, abandoned in 2016.

Bringing up kids in China is becoming much more expensive and there’s been a major cultural shift, with women increasingly focused on their careers.

China’s population aged between 15 and 64 has been falling ever since 2010, according to data from the World Bank.

Slower growth 

Big productivity increases could compensate for the declining worker population, but that has also been slowing quite sharply in recent years.

But to paraphrase a famous 19th-century remark, when China sneezes, the world’s economy catches a cold.

After expanding on average almost 10% a year since reforming its economy in 1978, China made up more than 17% of the global gross domestic product in 2020, according to World Bank data. Its share of global trade was 15%.

In developed economies, the impact may be less direct but no less worrying.

“Slower growth in China will have a negative impact on the economic development in Europe and the US,” said Hao Zhou, senior economist at Commerzbank, in a recent note.

“The consequences for inflation might be even much more important,” Zhou wrote.

Instead, China could well be on the same trajectory as Japan, where an ageing population has caused growth to slow to a crawl.

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Source: Business Insider

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