Opinion: China is ignoring the painful reality threatening its economic growth

Allison argued that China will eventually overtake the U.S. as the world’s largest economy, a notion bolstered by Chinese government economists who predict that the country’s GDP will be twice as large as America’s by 2030 and three times as large by 2049. Such forecasts have fueled strategic anxiety among many US politicians and scholars wary of China’s growing economic clout and geopolitical aspirations.

Allison’s thesis seems to have found a receptive audience within Chinese leadership circles. In fact, the Chinese economy’s explosive growth — GDP has skyrocketed to 76% of comparable U.S. GDP in 2021 from 7% in 1990 — has evidently convinced policymakers in both China and the U.S. that the Thucydides Trap is indeed inevitable.

But, to borrow again from ancient Greece, these predictions fail to account for China’s Achilles’ heel: its bleak demographic outlook. An aging population can hinder production, reduce consumption, stifle innovation, undermine public morale, and erode economic vitality. In the 2007 edition of my book Big Country with an Empty Nest, I likened China’s demographic trajectory to a sprinter — quick but lacking stamina. By comparison, both the U.S. and India are marathon runners, poised to dominate the 21st century.

Japan, which I likened to a middle-distance runner, provides a cautionary tale. With a rapidly growing workforce and a young population, Japan’s GDP soared from 8% of America’s in 1960 to 73% by 1995. In 1994, however, its prime-age labor force (15-59) began to decline, and it has since trailed the U.S. by every demographic measure. Japan’s economic growth rate has been lower than America’s since 1992, and its GDP has fallen to a mere 16% that of the U.S. in 2023.

Italy’s experience underscores the danger of ignoring demographic shifts. The country’s prime working-age labor force has been shrinking since 1993, and its population is significantly older than that of the U.S. Consequently, its GDP has dropped from 20% of America’s in 1992 to 8% this year.

China’s population aged more rapidly than previously predicted, and its fertility rate (births per woman) has been lower than that of the U.S. since 1991 and below those of Japan and Italy since 2021. China’s prime-age labor force began to shrink in 2012, signaling the end of its three-decade run of double-digit GDP growth.

In the decade since then, the gap between the Chinese and U.S. economies continued to narrow, partly owing to China’s massive housing bubble. But by 2031-35, China will lag behind the U.S. in every demographic metric, and its GDP growth rate will likely fall below America’s. Chinese GDP has fallen from 76% of America’s in 2021 to 66% in 2023. While this decline is likely the result of short-term fluctuations, it could foreshadow a widening economic divide between a rapidly aging China and a largely middle-aged U.S.

Read: America’s getting older — and, actually, that’s good news for the stock market

America’s demographic advantages have played a crucial role in maintaining its global dominance. Its post-World War II baby boom, for example, exceeded Europe’s. Moreover, the U.S. experienced a second baby boom from the late 1970s to the mid-2000s, as its fertility rate increased to 2.1 in 1990 from 1.74 in 1976, and remaining stable until 2007.

Over the same period, the European Union’s fertility rate fell to 1.52 from 2.06. By 2008, the median age in the EU was four years higher than in the U.S. Moreover, while the EU’s prime-age labor force began to decline in 2008, America’s workforce is expected to remain steady until 2048. Unsurprisingly, EU GDP, which was 1.1 times that of the U.S. in 2008, has fallen to 68% of the U.S. level in 2023.

But the U.S. has its own reasons for concern. America’s fertility rate fell to 1.67 in 2022 from 2.12 in 2007, and is expected to decline further as more women delay marriage and childbirth and as male labor-force participation declines.

Moreover, the U.S. often struggles to address its demographic challenges effectively. Despite spending more on health care than any other country, the U.S. has the shortest life expectancy in the developed world. Alarmingly, one in 25 American five-year-olds today will die before their 40th birthday, with drug overdoses and gun violence among the leading causes. These demographic shifts could lead to an economic slowdown, undermine political cohesion, and even endanger American democracy.

Both China and the U.S. have entered a period of economic and political turmoil characterized by strategic anxiety and heightened risk of miscalculation. Both also seem to downplay the severity of their respective demographic crises. Left unaddressed, China’s demographic trap could precipitate a civilizational collapse.

Meanwhile, the U.S. could find its global influence diminished. Whereas it once single-handedly shaped the international order, its ability to preserve global stability now hinges on the cooperation of its allies and engagement with China. Given the demographic challenges facing both countries, however, the anticipated Thucydidean clash of titans might ultimately resemble a schoolyard scuffle.

Yi Fuxian, a senior scientist in obstetrics and gynecology at the University of Wisconsin-Madison, is the author of  “Big Country with an Empty Nest” (China Development Press, 2013).

This commentary was published with the permission of Project Syndicate —
China’s Demographic Achilles’ Heel

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