Demographic Trends in China: Implications for Domestic and Foreign Policies

While China is going to expand its international position vastly over the course of the 21st century, negative demographic trends are expected to intensify as the century progresses. The expectations are that an aging population will increase social expenditures and slow, or even stagnate, economic growth in China in the medium to long-term. As such, China must rely on wise decision-making on the domestic front and effective multilateralism on the foreign policy front, as the limits on its policy choices in the coming decades will force Beijing to adopt more selective policies.

BY GEORGI IVANOV | DECEMBER 11, 2011

In the 21st century, China is going to become one of the most important states in the international system. With a population of over 1 billion people, it represents nearly 20% of the global population and this fact alone will combine with the country’s increasing economic might to give much weight to Beijing’s domestic and international policies in this century. There are significant challenges, however, that are associated with having a population as high as China’s. The first one is that in the 21st century, China is facing a process of population aging as a consequence of the one-child policy implemented since the 1970s in an effort to curb high population growth. The social costs are going to increase and be expressed in health care and social services expenditures, retirement incomes, and a lower ration of retired people to workers, who can support the costlier social security system. Further, the shift of the focus to the demographic problems China will face in this century will take away attention and resources from other policy areas, such as military spending and foreign policy, with the irony being that the availability of the amounts of right people for the many tasks at hand in a growing economy is central to everything the government in Beijing is going to do in the 21st century. A limited comparative perspective on the consequences of an aging and declining population comes from a survey of Eastern European states in the aftermath of the post-socialist transformations they experienced through the 1990s and 2000s, with massive emigration of skilled labour to the West and a collapse in birth rates across the region. From the foreign policy perspective, China may find itself challenged to meet its international obligations, commitments and aspirations when an aging population will become an exceptional domestic concern as we approach the middle of the century. These policies may include foreign troop deployments, the maintenance of international regimes and agreements and leading efforts in new policy areas, such as environmental problems, new energy sources or Space exploration; from this brief survey, it is possible to see the many implications demographic trends have for China’s domestic and international position.

Demographics

In the 1970s, a one-child family planning policy took effect in China to curb the high rate of population growth up until that point. The result has been that the birth rate dropped dramatically, but it has also introduced challenges to China that will be felt in the coming decades. On the one hand is the issue of an increasingly unbalanced sex ratio that sees men outnumbering women significantly; there is a cultural explanation in that families tend to prefer sons over daughters and in combination with the one-child policy, girls are consequently more disadvantaged. Rectifying this imbalance must be done with a perspective in mind, because it will only be restored within a generational vision of demographic policy-making.

The much more salient issue to Chinese demographics is that the same one-child policy will result in a population structure, where the amount of older and retiring people will be greater than the amount of children and young people in absolute terms. In other words, China will face the problem of an aging and decreasing population in the medium to long term.

The implications to such a development of events are considerable. The one that comes to mind immediately is social security. With fewer workers supporting more retirees in the long run, economic growth, skilled labour shortages and taxation will become important political issues on the domestic front. Policy responses will certainly include raising the retirement age to offset the negative effects of an aging population in some respects. A useful comparative perspective can be found with countries in Eastern Europe, which are going through this process in the present. Following the collapse of socialism, the exodus of skilled professionals to the West, the collapse of birth rates and the spike in death rates translated into an ongoing twenty-year trend of steady population decline. Keeping in mind that these states also have population age averages that are among the highest in the world, it will be important for China to keep an eye on how they cope with these restrictions, because within the foreseeable future it will confront the same problems, only on a much larger scale.

On the domestic front, the potential decline of China’s population will have impacts across a wide range of its roles. An aging and declining population, in the first place, will lead to an invariable rise in domestic expenses in the social sphere, from pensions and wages, to taxes and healthcare. The diversion of the needed resources will produce a negative impact on expenses towards military and security, for instance. In effect, Chinese policies on the domestic front may supersede Beijing’s international commitments and responsibilities in the long run. The most visible impact will be on the military component, as cuts will reduce the size, serviceability and types of hardware that China will be able to afford. However, the most dramatic cuts may happen in other areas, such as infrastructure or education.

We must not ignore the fact that ethnic tensions in China may also be affected adversely by negative demographic trends. In particular, tensions with Tibet, and with various minorities in Western China are not immune from flaring up as attention and resources may be shifted away from the border regions and towards the regions of high population concentration, where most of the aging population would be expected to reside – the towns and cities in coastal and southern China. The challenge for policymakers in Beijing is clear in its definition, but complex in the execution of the solution: the high rate of economic growth can be maintained for the time being, but with an aging population it will stabilize and gradually slow. At worst, it can stagnate and fall, at best, continue at a decreasing rate on a year-on-year basis. In turn, the rate of economic growth will affect the collection of taxes and the ability to allocate diminishing sources of income, as the ratio of workers to retirees falls through the 21st century. The solution must incorporate creative compromises that will ensure the dignity of the multitude of retiring workers in the 2030-2050 period and at the same time retain the national cohesiveness with minimal reference to military force in preventing uprisings and rebellions that remain realistic threats in China’s historically restive regions.

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Published in Political Reflection Magazine (PR) Vol. 2 No. 4