Down Angle Symbol A symbol in the form of an angle pointing downwards. Some Chinese consumers are cutting back on spending. Nikada/Getty Images
- China's population fell for the second straight day in 2023, data released on Wednesday showed.
- This is bad news for the world's second largest economy.
- Beijing is already struggling with deflation, weak demand and an ongoing real estate crisis.
China's population fell again last year – and that's a worrying sign for policymakers in Beijing, who are already struggling with deflation, a housing crisis and weak economic growth.
The number of people in China fell by two million last year, with lower birth rates accounting for the decline, according to National Bureau of Statistics data released on Wednesday. It is the second year in a row that China's population has declined after six decades of rapid growth.
For this reason, declining population numbers pose a threat to the world's second largest economy.
Worrying data
China's population fell in 2022 for the first time since the 1960s – and statistics on Wednesday showed the same thing happened again last year.
The number of babies born last year fell by 540,000 to just over 9 million compared to 2022 – the seventh consecutive annual decline.
Meanwhile, 11.1 million people died – nearly 700,000 more than in 2022. The increase was likely due to a surge in coronavirus infections after policymakers ended nearly three years of strict zero-COVID lockdowns in December 2022.
China also has more elderly people than any other country – those over 60 are expected to make up 28% of the population by 2040, according to the World Health Organization.
In the long term, an aging and shrinking population is likely to cause China's huge workforce to shrink, leading to its global dominance in manufacturing. There are already signs that the economic engine's influence is waning, with factory activity falling to its lowest level in six months in December.
Lower birth rates could also impact consumer spending over time — and that's bad news for American companies as well as those in China.
Since October, Apple has been publishing worrying sales figures for the latest iPhone 15. More and more Chinese consumers are opting for cheaper alternatives such as Huawei's competitor Mate 60. They are also reducing their spending on high-priced items.
A decline in population is also bad news for real estate, which accounts for a quarter of China's economy and 70% of household wealth. Put simply, if there are fewer people in a country, demand for real estate is likely to fall.
There could be enough vacant properties in China to house up to three billion people, a former deputy head of the statistics bureau said last year.
Economic headache
The population increases come at a time when Beijing is grappling with a range of other economic problems.
While figures released on Wednesday showed the economy grew 5.2% last year, slightly above the official target, China is also struggling with deflation – meaning prices are falling, not rising.
Deflation poses a threat to the entire economy as some people delay purchases because they think they will soon become cheaper. This is the same problem that Japan suffered from in the 1990s and 2000s.
China's real estate market has also fluctuated from crisis to crisis in recent years. Major developers Evergrande and Country Garden collapsed after accumulating huge debts, creating a mess that economists say could take more than a decade to fix.
All of this is causing countless headaches for the Chinese leadership.
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