AMID China’s various strengths in its robust economy are several fundamental weaknesses.
China’s central government is reportedly either insufficiently attentive to the problem or in some panic over its implications for future growth. However, the impending gloom many pessimists foresee may be exaggerated.
Demographics has always been a major issue for China. For many years when its population was the world’s biggest, fears of overpopulation dominated concerns of “feeding more than a billion mouths” daily.
But after policies elevated 75% of the population out of poverty and transformed China into the world’s biggest market and trading nation, challenges shifted. The priority now is to keep that huge market and its vast production capacity humming.
Alarm over the supposed shrinkage of the productive population centres on it happening at both ends simultaneously: a sizeable ageing population and low birth rates.
Many young adults choosing to delay or avoid marriage and raising a family does not help. Neither does an infertility rate of 17% of couples.
Yet there are mitigating factors that suggest the problem is manageable. Policymakers understand the implications and have begun to apply some solutions.
At the same time, many young adults are now either unemployed or under-employed. There are jobs available that many still opt to ignore.
In multiple industries from manufacturing to agriculture, automation has led to digitisation and various Artificial Intelligence applications. Modernisation also means a reduced need for staffing in the traditional sense.
China already has the world’s widest application of robotics with more than 1.75 million robots in daily factory operations. This world record is matched by 85% of the robots being produced by domestic toolmakers, so scaling up to meet production requirements is no problem.
China and the US are the world’s two leading countries in AI development and applications. In areas where the US leads, the gap is being narrowed.
Chinese industry’s constant climb up the production value chain is relentless. Where skilled employees are preferred over machines, training programmes can help upgrade current skills.
Policies still require manufacturing to remain a mainstay of the economy. But where quantity of output was the guiding priority before, it is now production quality.
This accords with the aspirations of “Made in China 2025” which technically begins next month, requiring upgrades in product quality across all industries. This natural progression is a familar pattern for major Asian industrialising economies.
The automobile industry exemplifies the parallel experience with Japan. After Japanese cars beat Western brands on price in the 1960s and 1970s, they progressed onto product quality: Honda, Nissan and Toyota introduced Acura, Infiniti and Lexus respectively in the 1980s.
BYD, Geely, GAC and GWM have now introduced luxury sub-brands with Denza, Zeekr, Hyper and Tank and Wey. The differences with Japan include Chinese brands being more competitive among themselves, operate on a larger scale, and offer quality upgrades faster.
Emphasising quality over just quantity also accords with the realities of China’s domestic market. Consumption capacity remains but has largely stayed latent, such that the fewer active consumers ready to spend would be buying upgraded goods further upmarket.
This also helps to improve competitiveness against Western brands. The automobile industry is an example, symptom and bellwether of current trends in international competitiveness in global markets.
Improving technology in various fields helps Chinese industry to continue producing more and better goods with a smaller workforce by raising productivity levels. It also helps to sustain population size through medical applications such as in-vitro fertilisation (IVF).
The IVF facility is gaining steady popularity with an average of 300,000 births a year. More IVF clinics nationwide will be made available from next year, with policymakers considering giving single women access to them.
China’s resilience in the face of challenges is considerable with a system responsive to challenges. Lifestyle preferences such as staying single for longer can ultimately be shaped by informed policymaking.
In the Great Famine of 1959-1961, the population dropped by almost 14 million. But in the following three years, the population grew by more than 46 million.
Reversals of the one-child policy came in stages in 2013, 2015 and 2021. While they should have been introduced earlier, today’s challenge is mostly one of policy calibration.
China’s experience, which covers economic successes as well as policy errors, should be valuable lessons to other developing nations in comparable situations.
One is that a large population need not be an insurmountable problem if sufficient resources exist to train a productive workforce. Another is that technology helps lower production costs, raise industrial productivity and adjust population size.
Yet another lesson lies in being pro-active to pre-empt impending problems. Responsible and responsive policymaking can help mitigate multiple challenges.
Bunn Nagara is director and Senior Fellow of the BRI Caucus for Asia-Pacific, and Honorary Fellow of the Perak Academy. The views expressed here are solely his own.
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