News Analysis: When less means more -- why China's demographic changes won't derail its economy

BEIJING, Jan. 17 (Xinhua) -- Declining and aging populations often evoke concerns over economic growth. But in China, these challenges are met with accelerated economic restructuring and a holistic response, showing that less can indeed mean more.

China's population continued its decline in 2024, with the National Bureau of Statistics reporting Friday a total population of 1.40828 billion by the end of 2024 -- a decrease of 1.39 million over that at the end of 2023, highlighting the ongoing demographic challenges facing the nation.

At the same time, births rose for the first time after seven years of decline, partly due to a baby boom in the post-COVID Year of the Dragon and stepped-up pro-birth government efforts, while China's economy logged a steady growth of 5 percent.

These changes underscore the nuanced nature of demographic shifts shaped by evolving societal trends and policy adjustments, and the possibility of securing sustained economic development against population headwinds.

In understanding the dynamics between population changes and economic development, priority should be placed on the long-term balanced development, rather than the sheer growth, of the population, Du Peng, dean of the School of Population and Health at Renmin University of China, said in an interview with Xinhua.

REDEFINING ECONOMIC GROWTH

As income levels rise, countries generally experience declining fertility rates and slower population growth. Among 37 middle- and high-income nations with populations exceeding 10 million, 17 have experienced population declines, according to a recent report by the Development Research Center of the State Council.

China's rapid industrialization has made these changes happen earlier than in many other nations, underscoring the unique challenges but also opportunities, it noted.

Despite concerns over a shrinking workforce, weakening investment momentum, and other negative impacts, a smaller population also comes with positive effects. It reduces strain on resources, alleviates employment pressures, and increases per capita access to infrastructure and public services, according to the report.

Rather than viewing population decline as an impediment, China is leveraging it to redefine economic growth.

A decreasing and aging population adds impetus to a shift of the growth model to one tailored to a shrinking demographic base, said Wang Qinchi, a researcher at the China Population and Development Research Center, adding that such a shift accelerates the transformation of economic growth drivers.

As a recurring theme in the progression of many developed nations, population decline underscores its dual nature -- posing challenges while catalyzing structural adaptation and creative advancements.

In China, the demographic change is accompanied by a significant surge in investment in talent and innovation. China's R&D workforce, measured in full-time equivalents, has grown 10-fold from 1991 to 2023, maintaining its position as the global leader for 11 consecutive years. Meanwhile, R&D funding reached 3.33 trillion yuan (463.21 billion U.S. dollars) in 2023, marking a staggering 233-fold increase from 1991.

Despite a decline in its working-age population over the past decade, China has significantly advanced in global innovation rankings, now holding 11th place, according to the World Intellectual Property Organization.

This innovation momentum is fueling new growth engines and propelling high-quality development. In 2023, China's "three new" economy -- comprising new industries, new business formats, and new business models -- accounted for 17.73 percent of the overall GDP, underscoring the growing role of innovation in economic transformation.

At the same time, labor productivity grew by 5.7 percent year on year, reaching 161,615 yuan per person in 2023, reflecting improved resource efficiency, accelerated industrial transformation, and enhanced competitiveness.

Just as the demographic dividend played a crucial role in China's economic rise following reform and opening-up, the talent dividend is now driving the country's innovation-led development.

Drawing on standards from the Organisation for Economic Co-operation and Development (OECD), the report highlighted that China's science and technology workforce is 1.3 times that of the United States and 5.5 times that of India. Additionally, the country is poised to add 11 million college-educated workers to its labor force annually over the next decade.

"China is at the crossroads where the population and talent dividends converge," Du noted, adding that the workforce remains abundant, and the talent pool is expanding, creating a foundation for the transition toward a talent-driven economy.

PROMISE OF MORE

While many tend to oversimplify and exaggerate the role of population in an economy's outlook, demographers take a different stance.

China's track record says it all: though a massive, growing population offered a vast pool of workers, it was the country's reform and opening-up efforts that put the labor advantages to work and scripted its economic success in previous decades.

Similarly, experts note that future prosperity hinges on tailoring institutional arrangements to the evolving demographic trends.

Some of the arrangements China has made include building a high-standard socialist market economy in all respects, supporting all-around innovation, and providing full life-cycle population services to all in order to promote high-quality population development, which are reform tasks listed at the third plenary session of the 20th Communist Party of China Central Committee in July last year.

To prevent the population from dropping too fast, China has phased out the decades-long one-child policy and announced support for couples who wish to have a third child. Local governments have since put in place a series of stimulus measures for childbirth, including subsidies, expanded insurance coverage, extended maternity leave, and more public child-care facilities.

At the same time, policies aimed at enhancing elderly care services are better equipping China to offset the impact of an aging society. The country plans to establish a three-tier elderly care network at the county, township and village levels, and to coordinate home-based and community-based care with the professional, supporting role of institutional care, according to recently released guidelines.

These efforts also unlock new economic prospects, especially in the burgeoning silver economy. The latest data shows that China's silver economy was valued at 7 trillion yuan and is projected to expand to 30 trillion yuan by 2035.

China's response to demographic shifts is multifaceted, covering the entire lifecycle with integrated policies in social security, healthcare and education, transforming these challenges into key sources of economic strength, experts say.

Building a birth-friendly society, enhancing elderly care services, and bridging disparities not only improve quality of life but also stimulate demand for new products and services, said Du.

Providing safer, more independent, and dignified living conditions for the elderly, in particular, is expected to drive growth in the tertiary sector and shift the focus toward technological innovation -- key opportunities arising from demographic transformation, he added. ■