Research Briefing | Jan 18, 2023

China’s demographic shift poses tough economic and fiscal challenges

China’s demographic shift poses tough economic and fiscal challenges

China is undergoing a demographic transition that implies downward pressure on labour supply and economic growth over the coming decades. Based on the latest data from the National Bureau of Statistics, mainland China’s population fell 850,000 to 1.41bn in 2022 – the first decline in 60 years. The number of births fell to a new low of 9.6mn in 2022, down from 10.6mn in 2021, and was outpaced by the 10.4mn deaths recorded in 2022, up from 10.1mn in 2021, partly related to Covid infections.

What you will learn:

  • In the near-term, we expect the labour participation rate will recover as the country reopens and activity normalises. But this will not be enough to fully offset the effects of an ageing population on the size of the working-age population, and we expect the decline in labour supply growth will deepen in the coming decades.
  • A shrinking labour force will widen the pension gap, weakening the social safety net. This could keep savings rates high, hindering the government’s rebalancing efforts towards a consumer-driven economy. The fiscal implications are also negative, as the fiscal space for a response to any future crisis will be constrained, particularly as local government debt levels are already elevated.
  • The worsening demographics will be a drag on growth, leaving the economy reliant on investment and productivity. However, returns on investment are declining, while productivity is being challenged by the international threats of technological decoupling and supply-chain diversification. We forecast China’s GDP growth will slow to an annual average of around 4.5% this decade, from 7.7% per year in 2010-2019.
Back to Resource Hub

Related Resouces

Post

YICAI (China Business Network): We are at a turning point of the world economic cycle

Adrian Cooper, CEO of Oxford Economics, talked about global prospects and key risks in the interview with YICAI (China Business Network). Highlights of this interview: Click the link to watch the full interview: https://m.yicai.com/video/102150524.html To download our latest reports, please check out Resource Hub – Oxford Economics.

Find Out More

Post

China-India – Expanding the middle classes

Indian consumers' spending power is far behind that of their Chinese counterparts, and we are sceptical about the pace of catch-up. Even if the Indian economy achieves the ambitious growth targets set, there are few signs that record levels of income inequality will reverse soon.

Find Out More

Post

The China electric vehicle boom promises much

China's production of electric vehicles is booming, accounting for nearly 70% of global EV sales in 2023 with 9.5 million vehicles produced. If the success of Japan's auto industry in the last century is any guide, the rise of China's EV sector promises to lift productivity and sustain the growth momentum of manufacturing for years.

Find Out More