China’s policy was based on the assumption of a young and emerging East and an aging and therefore declining West. Yi Fuxian says in an opinion piece that the country has already passed its peak Project Syndicate.
According to the scientist, the gap between its declining demographic and economic strength and its growing strategic ambitions is a major geopolitical risk.
Demographic Errors – China is already shrinking
If the great powers on the world stage are wise, they will use their existing influence to work together for a sustainable world order before their power vanishes.
In January, China admitted that its population had begun to shrink last year. This is about nine years earlier than demographers expected. The consequences of this can be significant. This means that China’s entire economic, foreign and defense policies are based on incorrect demographics.
Aging puts pressure on economic growth: just look at Japan
Population aging will continue to affect the Chinese economy. The old-age dependency ratio (the number of people over 64 divided by the number of people between the ages of 15 and 64) has a strong negative correlation with GDP growth. An example of this is Japan.
Thanks to its low life expectancy, Japan has benefited from rapid economic growth for many years. In 1992, Japan’s average age was 5.5 years older than the United States, and Japan’s old-age dependency ratio was beginning to exceed that of the United States.
Since then, Japan’s GDP growth has been lower than that of the United States. Japan’s per capita GDP increased from 16% of the US level in 1960 to 154% in 1995. But by 2022, that figure has fallen to 46% and is likely to drop below 35% in the future. .
Also in Taiwan and South Korea
Fuxian sees the same trend in Taiwan and South Korea. After more than five decades of rapid economic growth, thanks to a young population, both economies subsequently stagnated as their labor forces shrank and with it per capita GDP.
Looking at China this way, the same scenario is evident. In 1980 the average life expectancy there was 21, eight years less than in America, and from 1979 to 2011 GDP grew at a rate of 10% annually. But the workforce in the most active age group (15-59) began to shrink in 2012, and by 2015 Chinese GDP growth had slowed to 7% and 3% in 2022.
India has already overtaken China, so will China drop to third place?
As China’s birth rate declines, Chinese manufacturing will continue to decline, creating new inflationary pressures in the United States and elsewhere. Although China’s population was 1.5 times greater than India’s in 1975, Chinese government figures show it was less last year (1.411 billion compared to 1.417 billion).
In fact, India’s population surpassed China’s ten years ago, and will be about 1.5 times larger than China’s by 2050, with an average age of 39 even a full generation younger than China (57).
China is getting older faster than the United States. By 2030, life expectancy in China will already be 5.5 years higher than in the United States, and in 2033 the old-age dependency ratio will begin to overtake that of the United States. GDP growth will be lower than the United States in 2031-2035. If the United States is ever surpassed as the world’s largest economy, it will be overtaken by India, not China.
This could have major geopolitical consequences
These false predictions may have a geopolitical domino effect that may eventually lead to the destruction of the current world order. The Chinese authorities based their policies on their long-standing conviction of a young and emerging East and the decline of the influence of the West.
Putin assumed that, too. He assumed that if he maintained stable relations with the emerging China, the West would not be able to hold him accountable for his aggression against Ukraine.
Is Xi moving in the same direction as Putin with the shattering of the China dream?
China’s decline is gradual. It will remain the second or third largest economy in the world for decades to come. But the gap between its dwindling demographic and economic strength and its growing political ambitions could leave the country vulnerable to strategic mistakes.
Memories of past glory or fear of losing prestige can lead the country down the same dangerous path that Russia took in Ukraine. So China’s leaders should learn from Putin’s failure and wake up from their unrealistic dream of national renewal.
The West can learn from it, too
The United States can also learn from its failure to manage a collapsing Russia. The United States and its allies, including Canada, the United Kingdom, Australia, New Zealand, the European Union, Japan and South Korea, will face an aging population and the resulting economic decline.
Their combined share of the global economy has already fallen from 77% in 2002 to 56% in 2021, and this trend will continue. The geopolitical consequences should be clear. If the great powers were wise, they would work together to achieve a permanent world order before they no longer had the power to do so.
Also read: “China will become the center of electric vehicles in the world”
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