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What did the latest census data show?

Births fell 18% in 2020, and while this was partly due to the pandemic, it was also the fourth straight year that births fell. The country’s fertility rate, which measures births per 1,000 women of childbearing age, remained very low at 1.3, technically above the 1.2 level from the last 2010 census, but most experts believe the earlier ones Numbers were considerably undercounted. The country’s birth rate is now one of the lowest among major countries in the world. It is also well below the 2.1 level at which a population exactly replaces itself from one generation to the next.

Other data showed that the country’s working-age population (defined as those between 15 and 59) has declined by 40 million people since 2010, accounting for 63.4% of the population, compared with 70.3% a decade ago. The number of people over 65 has now risen from 8.9% to 13.5% of the total population. It is expected to rise to 20% by 2025.

All in all, it looks like China’s population is in danger of shrinking anytime soon. Nobody knows exactly when, but a study late last year said it could be as early as 2027.

How did China get to this point?

The problem is rooted in the strict family planning policies that China introduced in the 1970s, known as the “one-child policy”. At the time, the country’s leaders feared that a booming population could drain the country’s resources and derail their development goals. Therefore, they limited all families to one child. Previously born people are now retiring, and there are fewer people in the younger generation to replace them.

After decades of rapid economic growth, the government raised the limit to two children in 2015. That led to an increase in births for two years, but the effect has waned due to the high cost of raising children in China today. Housing has become increasingly expensive in the country’s largest cities, and families are under severe social pressure to spend wastefully on their children’s education to help them get on in life.

What are the economic effects of a shrinking population?

For decades, one of China’s great economic advantages has been its huge and rapidly urbanizing population, which has meant a massive supply of cheap labor to make and build things it can sell around the world. If that labor pool shrinks, it hits the core of the economic model that has made China the world’s second largest economy. In addition, a decline in the number of domestic consumers – particularly those of working age – would curtail officials’ plans to encourage more domestic spending to reduce the country’s reliance on exports.

Meanwhile, the rapid rise in the number of retirees living longer thanks to improved health care will require more government spending on pensions, exacerbating the problems many municipalities are already facing with rapidly increasing debt burdens.

In most societies, doesn’t birth rates tend to decrease as they become more successful?

Yes, but in China’s case, the phenomenon occurs earlier in its development than in other Asian countries such as South Korea and Japan. This means that Chinese citizens are less prosperous in old age and the state has built fewer safety nets.

Can technology and automation fill some of the gap?

Theoretically yes. Automation offers a way out for companies struggling with rising labor costs. And while the number of new workers in China may decrease, rising levels of education lead to higher productivity per worker, which increases economic performance. However, investing in technology requires careful planning and it can take years to see benefits. They also threaten to cause more economic and social disruption in areas that are not well equipped, such as China’s traditional rust belt in the northeast, which is already suffering from high unemployment, rising welfare costs and slower growth.

What does all of this mean for Chinese efforts to influence the global stage?

A shrinking population does not in itself endanger China’s geopolitical goals. However, the strain on the economy and tax system can limit the government’s ability to invest in areas essential to expanding the country’s influence, including promoting clean technology domestically, building the military, and lending to other countries.

Are civil servants able to address these issues?

They see the challenge, but their responses so far have been incremental and scattered. Restrictive family planning guidelines – such as the two-child limit – remain in place, and there is no comprehensive plan to incentivize births that require changes in education and housing policies. One reason for the tremors is that, like all governments, Beijing has focused on more immediate issues such as the pandemic and the trade war with the US. Another reason is that addressing demographic challenges threatens sensitive political narratives in China that focus on a bright future and improving people’s livelihoods.

In the run-up to the Chinese Communist Party’s 100th anniversary in July, there is no political will to face these looming problems directly. But the political debates are heating up, especially after the latest census data, and we will hear a lot more on this topic in the months and years to come.

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