On January 17, China’s National Bureau of Statistics released economic and demographic data on China. This has impacted China’s demographic dividend. According to the data, in 2022, 9.56 million babies were born, and 10.41 million people died, which means that China’s population decreased by about 850,000 people, down to 1.41 billion, with a natural population growth rate of -0.6 percent.
This is the first time since 1961 that the number of births in China has fallen short of the number of deaths, or what demographers call a “mortality crossover.” Additionally, this negative population growth trend is almost irreversible for the foreseeable future
This historic turning point in China’s demographic change has generated much debate. Economists say that as China’s population ages and declines, the demographic dividend on which the Chinese economy has relied for so long will soon disappear, with far-reaching consequences for the Chinese economy and the world.
The possibility of China overtaking the U.S. to become the number one economy is diminishing as the demographic dividend disappears, and Xi Jinping’s “Chinese dream” of world domination is gradually fading away.
Please watch this China Observer video about China’s fading demographic dividend.
Observers have noted that China’s Communist regime, led by Xi Jinping, is unhappy with the decline of the demographic dividend.
To create a new demographic dividend for their benefit, the regime has employed various tactics over the past few years, such as expanding state control, suppressing the private sector and real estate market, and reviving a planned economy, all of which have led to the suppression of wealth among the general population.
It is well known that a country’s population is an essential dynamic force for long-term economic growth. Over the years, China’s status as the world’s most populous nation has drawn substantial foreign investment and transformed the country into a central manufacturing hub.
The Communist Party’s official media has also admitted that China’s economy has taken off in a short span of 40 years due to the cheap and abundant labor force brought about by the so-called “demographic dividend.”
In economics, a good demographic dividend is defined as when the working population aged 15 to 64 exceeds two-thirds of the total population, and the dependency ratio (which is the number of dependents, young and elderly, relative to the working-age population) is less than 50 percent.
This period of demographic change can boost economic growth as the increased number of working-age individuals can support a larger dependent population and drive investment and production.
A demographic dividend is not only dependent on a large population but also on specific prerequisites. These include a cheap and young labor force who are healthy and eager to work. When these conditions are met, the population can be transformed into a demographic dividend that can drive economic growth through investment and production.
However, external and human factors can impact a country’s demographic dividend, and political leaders have the power to create or destroy this potential advantage.
China’s last demographic dividend was realized during the three baby booms in the last century and during a time of extreme poverty. China experienced three ‘baby booms’ from 1950-1958, 1962-1975, and 1981-1997.
The country’s economic development was seriously impacted by the various campaigns launched by the Communist leaders after the establishment of the regime in China and all the way leading up to 1980. In particular, during the turbulent decade of the Cultural Revolution from 1966 to 1976, the Chinese economy faced a significant setback, and production halted, resulting in extreme poverty for the people of China.
However, after beginning reforms and opening up in the 1980s, China’s huge population, cheap labor force, and a strong desire to work created a new demographic dividend, attracting foreign investment and leading to 40 years of rapid economic growth.
However, with the advancement of the economy and shifts in China’s population makeup, the period of China’s demographic dividend began to decline in 2011, coinciding with the start of Xi Jinping’s presidency.
Let’s compare the average wage in China over time. According to the National Bureau of Statistics, the average annual salary of the urban population in China in 1980 was only 762 RMB, while in 2020, the yearly per capita wage in urban China was 97,379 RMB.
Over the past 40 years, after accounting for factors such as currency devaluation, the real wage in China has increased to approximately 7.6 times its original value. The rapid wage increase will simultaneously trigger the rapid disappearance of the demographic dividend.
Additionally, following 2008, China’s real estate and financial sectors generated a substantial real estate bubble and economic bubble, causing imported wage inflation to rise and leading to the decline of China’s demographic dividend.
As the population born during the peak of the 1960s approaches 60, China faces a substantial wave of retirements. Thus, the working-age population (aged 15-64) is gradually declining. According to the National Bureau of Statistics of China, China’s prime working-age population, aged 16-59, peaked at 925 million in 2011 and started to decline in the following year.
By the end of 2021, the number had dropped to 882 million, making up 62.5 percent of the total population, translating to a decrease of 43 million compared to 2011. The legal retirement age for enterprise workers in China is 60 for men, 50 for female workers, and 55 for female managers.
This means that the dependency ratio in China is under pressure to rise further. Data shows that in 2010 the dependency ratio of China’s population was 34.2 percent, the lowest in 40 years. However, since 2011 it has been increasing rapidly, and by 2021 China’s dependency ratio has reached 46.44 percent, with nine provinces already having a dependency ratio of over 50 percent.
Another phenomenon that cannot be ignored is the high unemployment rate among young people. In July last year, the unemployment rate of young people aged 16-24 in China reached 19.9 percent. While this is undoubtedly related to the economic downturn caused by the pandemic, it also has much to do with young people’s aspirations.
In recent years, the younger Chinese generation has shown a common tendency to lack motivation (known as “tangping,” i.e., lying flat and maintaining the status quo) due to facing intense competition in the workplace and struggling to find desirable job opportunities, which has resulted in a decrease in their desire to work and, therefore, the inability to contribute to a demographic dividend.
Xi Jinping changed China’s demographic dividend
Judging by the above figures, when Xi Jinping came to power in 2012, China’s demographic dividend had already entered a period of decline. So instead of enjoying the benefits of the demographic dividend, he had to bear the costs of its disappearance. At this point, he needed to create a new demographic dividend for his use, so he had to change the game’s basic rules.
The only way he can achieve this goal is to alter the existing wealth conditions and societal patterns by decreasing the wealth of the Chinese population and reverting to their standard of living and wealth before the reform and opening up period. By doing so, workers’ expectations and wage demands would significantly decrease, creating a new demographic dividend.
In an autocratic country like China, the direction of the country’s development is determined by the supreme leader’s will. Recently, policies implemented by the Chinese Communist authorities seem to aim to reduce the population’s wealth and eliminate the middle class. This new demographic dividend will probably be created in the process, but the worst is yet to come for the poorest part of the population.
The first step is to suppress the real estate sector and deflate the real estate bubble, as it is the primary driver of wage inflation and the erosion of the demographic dividend. To achieve this goal, the Chinese government has also emphasized that housing should not be used as a speculative investment.
Secondly, China’s middle to high-income class must be removed, drastically reducing their incomes. This is because middle and high-income people are an obstacle to the demographic dividend and the return of poverty to the entire population.
To achieve this goal, the Chinese Communist government has arrested several Chinese entrepreneurs and wealthy individuals over recent years to fight crime and eliminate wrongdoing. Those who are obedient are forced to make donations in the name of shared prosperity.
Additionally, the suppression of education and technology industries, usually dominated by the middle class with higher incomes, also assists the effort to bring back poverty for everyone.
Coupled with the shift in industrial chains due to the US-China trade war and the widespread bankruptcy of small and medium-sized enterprises caused by the pandemic, the phenomenon of the large-scale return of the middle class to poverty is becoming more and more prevalent.
At the same time, the Chinese government has stepped up its efforts to target middle and high-income earners for tax evasion. As a result, many celebrity billionaires and social media influencers have been subject to tax recovery in recent years.
In May 2018, Chinese actress Fan Bingbing was fined 880 million RMB (approximately US$130 million) for tax evasion. In October 2021, China’s “queen of live streaming,” Viya, was fined over 1.3 billion RMB (approximately US$198 million) for tax evasion.
In addition, according to the Chinese media, China will complete the fourth phase of the so-called Golden Tax Project by the end of 2022.
The Golden Tax Project is a comprehensive wealth monitoring project, the latest progression of which is said to be accurately tracking every bank card and monitoring every transaction, coupled with the replacement of paper money by digital Renminbi so that in the future, China’s middle and high-income earners will no longer be able to hide their wealth and will have to hand it over to the state.
Eliminating high-income earners is expected to result in a widespread return to poverty, as envisioned by Xi Jinping. This could reignite a new demographic dividend, but this process will likely be difficult and painful for the people.
Therefore, they may be disobedient and resist being part of the demographic dividend that Xi wants. Naturally, the Chinese Communist authorities would have predicted this and taken measures to tighten control over the people.
China’s strict censorship of speech, the ubiquitous presence of surveillance cameras, and even mandates for various QR code scans during the pandemic all serve as tools for the Communist Party to maintain control over the population.
The country operates closely monitored and controlled, functioning like a labor farm. It is well known that prison-like management is the most effective way to achieve a demographic dividend, as the cost of wages for reformed laborers is nearly zero.
By transforming China into a controlled prison-like environment, free laborers become captive laborers under supervision. This is how the powerful and wealthy in China and their families can reap the benefits of the demographic dividend for generations. North Korea serves as a prime example of this concept. Some have even referred to China as “West Korea,” which does not seem an unreasonable comparison.
Although the Chinese Communist Party’s mouthpiece always talks about shared prosperity, it is a lie to deceive the people. The so-called shared prosperity is a robbery of people’s wealth, resulting in common poverty and a new demographic dividend.
