China's population falls for a third straight year, posing challenges for its government and economy

China's population has declined for the third consecutive year, further highlighting the severe demographic challenges facing the world's second-most populous nation. China is grappling with the dual pressures of an aging population and a shrinking workforce.

According to a government announcement released today, China's population stood at 1.408 billion at the end of 2024, a decrease of 1.39 million from the previous year. This population data reflects the profound changes occurring in China's demographic structure.

New data shows that China's economic growth rate for 2024 was 5%, lower than the previous year but in line with Beijing's growth target of "around 5%". Strong exports and recent stimulus measures have provided a boost to economic growth. Additionally, the government reported that the economy grew by 5.4% in the fourth quarter, exceeding economists' expectations.

The population data released by the Chinese government is consistent with global trends, particularly in East Asia, where birth rates are plummeting in countries and regions such as Japan, South Korea, and Hong Kong. Three years ago, China joined Japan and most Eastern European countries as one of the nations experiencing population decline. The reasons for this phenomenon are similar in many cases: rising living costs have led young people to postpone or forgo marriage and childbirth, instead pursuing higher education and careers.

While people are living longer, this is not enough to offset the decline in the birth rate. Countries with relatively strict immigration policies, like China, are particularly at risk of demographic imbalances. For a long time, China has been one of the world's most populous countries, having survived invasions, floods, and other natural disasters, relying on rice in the south and wheat in the north to sustain its vast population.

After World War II, the Chinese Communist Party came to power in 1949, and large families reappeared, with the population doubling in just three decades. Despite the deaths of tens of millions of people during the Great Leap Forward and the Cultural Revolution, the trend of population growth did not change. After the end of the Cultural Revolution, Communist Party officials began to worry that the population was growing faster than the food supply, and thus began to implement the strict one-child policy.

Although the one-child policy was never made law, women had to apply for birth permits, and those who violated it could face forced late-term abortions and sterilization procedures, hefty fines, or even have their children stripped of their identity numbers, effectively making them "non-citizens." The preference for male offspring was particularly strong in rural areas, and although two children were ostensibly allowed, the government's focus remained on rural areas, where women were forced to provide proof of menstruation, and buildings were plastered with slogans like "fewer births, better births."

The government attempted to eliminate the practice of selectively aborting female fetuses, but because abortion is legal and readily available, those who operated illegal ultrasound machines thrived. This is the biggest factor contributing to China's gender imbalance, with millions more boys born for every 100 girls, increasing the risk of social instability that could be caused by China's single male population. Today's report shows a male-to-female ratio of 104.34:100, but independent organizations believe this imbalance is much higher.

What concerns the government even more is the sharp decline in birth rates. In 2023, China's total population declined for the first time in decades, and in the same year, China was surpassed by India as the world's second-most populous country. Rapid population aging, a shrinking workforce, a shrinking consumer market, and emigration overseas are putting enormous pressure on the social system. While military and infrastructure spending continues to increase, China's already fragile social security system is crumbling, and more and more Chinese are refusing to contribute to the underfunded pension system.

Currently, more than one-fifth of the population is over the age of 60, with official data showing 310.3 million people, or 22% of the total population. It is projected that this number will exceed 30% by 2035, sparking discussions about revising the official retirement age, which is one of the lowest in the world. Due to the declining number of students, some vacant schools and kindergartens are being converted into elderly care facilities.

These developments confirm the adage that China, as the world's second-largest economy, may "grow old before it gets rich" while facing significant headwinds. Government-introduced incentives, including cash rewards and housing subsidies for having three children, have only had a temporary effect.

China's economy grew faster than expected in the December quarter, but annual growth has been slowing as the aging population puts pressure on the nation's finances. Exports accelerated as businesses and consumers rushed to export ahead of potential tariffs on Chinese goods from incoming US President Donald Trump.

The National Bureau of Statistics report stated that "the national economy is generally stable, progressing steadily, and new achievements have been made in high-quality development." The report also noted that "especially after the timely introduction of a package of incremental policies, social confidence has been effectively boosted, and the economic recovery has been significant." Manufacturing was a strong engine of economic growth last year, with industrial output increasing by 5.8% year-on-year. Total retail sales of consumer goods increased by 3.5% year-on-year. Exports increased by 7.1% year-on-year, while imports increased by 2.3% year-on-year.

The world's second-largest economy has been struggling with weak consumer spending and resulting deflationary pressures after a sluggish recovery from the COVID-19 pandemic and a downturn in the real estate sector, which was once a major driver of business activity. China's economy grew by 5.2% annually in 2023, and economists predict that economic growth will slow further in the coming years.

Some economists say that economic growth is slower than official estimates. Cornell University economics professor Eswar Prasad said: "The precise achievement of official growth targets is highly questionable at a time when most indicators of economic activity and financial markets are flashing red." He also said that "in addition to an adverse external environment that may limit exports, the economy remains plagued by weak domestic demand and persistent deflationary pressures."

Trump, who will take office next week, has pledged to raise US import tariffs on Chinese goods. This week, the Biden administration also further restricted exports of advanced semiconductors and technologies to maintain US leadership in advanced technology and prevent China from obtaining these technologies. The ruling Communist Party has launched a series of stimulus measures, including lowering banks' reserve requirement ratios, lowering interest rates, and allocating billions of dollars from the 2025 budget in advance for infrastructure projects.

Some economists say that these gradual measures need to be complemented by broader structural reforms to improve productivity and reduce the economy's reliance on the construction and export manufacturing sectors. At the same time, a scarce social security system is causing families to save rather than spend, while falling housing prices and a weak stock market are hurting household wealth, exacerbating the problem.

Prasad said: "China needs a strong, multi-pronged policy mix to revive growth momentum." "Such a policy mix needs to include large and targeted monetary and fiscal stimulus measures, complemented by reforms and other measures to revive private sector confidence."