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China's population keeps falling — and that's more bad news for the world's 2nd-largest economy

George Glover   

China's population keeps falling — and that's more bad news for the world's 2nd-largest economy
  • China's population fell for a second consecutive year in 2023, data published Wednesday showed.
  • That's bad news for the world's second-largest economy.

China's population fell again last year – and that's a worrying sign for Beijing policymakers already grappling with deflation, a property crisis, and anemic economic growth.

The number of people in China declined by two million last year, according to National Bureau of Statistics data published Wednesday, with lower birth rates driving the fall. It's the second consecutive year that China's population has shrunk after six decades of rapid growth.

Here's why dropping 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 Wednesday's statistics showed that the same thing happened again last year.

The number of babies born last year fell by 540,000 compared with 2022 to just over 9 million — the seventh consecutive annual fall.

Meanwhile, 11.1 million people died — almost 700,000 more than in 2022. The spike was likely driven by a surge in coronavirus infections after policymakers ended nearly three years of harsh zero-COVID lockdowns in December 2022.

China also has more old people than any other country – with over-60s expected to make up 28% of the population by 2040, according to the World Health Organization.

In the long term, an ageing and declining population is likely to reduce the size of China's massive workforce, which drives its global manufacturing dominance. There are already signs that the economic engine's influence is starting to wane, with factory activity shrinking to its lowest level in six months in December.

Lower birth rates could also hit consumer spending over time – and that's bad news for American companies, as well as those in China.

Since October, Apple has been posting worrying figures about sales of the latest iPhone 15, with more Chinese consumers opting for cheaper alternatives such as Huawei's rival Mate 60. They've also been reducing their spending on big-ticket items.

A declining population is also bad news for real estate, which accounts for a quarter of China's economy and 70% of household wealth. To put it simply, when there are fewer people in a country, demand for property is likely to fall.

There could be enough vacant properties in China to house up to 3 billion people, a former deputy head of the statistics bureau said last year.

Economic headaches

The population numbers come as Beijing struggles with a number of other economic issues.

While figures published Wednesday showed the economy expanded by 5.2% last year, slightly above the official target, China is also battling deflation – meaning prices are falling, rather than rising.

Deflation poses a threat to the whole economy, because some people will delay purchases thinking they'll soon get cheaper. That's the same problem Japan suffered in the 1990s and 2000s.

China's property market has also lurched from crisis to crisis in recent years, with major developers Evergrande and Country Garden collapsing after piling up huge debt, creating a mess that economists have warned could take more than a decade to fix.

All that adds up to a myriad of headaches for China's leaders.