China's population to enter negative growth after 2025: Here's how it will impact economy

The demographics of the world’s most populous country is set to change as China will witness a negative population growth after 2025, a leading economist said warning that the plunge would negatively influence consumer demand. Cai Fang, who is a member of the monetary policy committee of the country’s central, said that the population of China will peak in the coming four years. However, he cautioned that the milestone will be marked by a significant shortage in consumer demand. When the total population enters negative growth (after 2025), there will be a "shortage of demand", PTI reported as Cai was quoted as saying by Hong Kong-based South China Morning Post on Sunday.

Since its inception, the Chinese economy is significantly dependent on domestic consumers. External trade only makes up only a “very small portion” of China’s economy. According to statista.com, international trade amounted to approximately 17.7 per cent in 2020, slightly increasing from 17.4 per cent in the previous year. Calling attention to the role of local demand, Fang said that authorities need to pay attention to the “impact of demographic on future consumption.”

'would be too late to reverse impacts' 

Since 1980, China had mandated 'Single child' policy in the country.  It was only in 2016 that the CCP allowed couples to have two offspring. Amidst rising living costs, Chinese residents still opt for smaller families. A People's Bank of China (PBOC) study released a few days ago, suggested that the country should liberalise its birth policies or face a scenario in which it has a lower share of workers and higher burden of elderly care than the United States by 2050. In their study, the experts also cautioned the Xi-Jiping administration against restricting people’s ability to have children or it will be too late to reverse the economic impact of a declining population. 

Meanwhile, data released by China's National Bureau of Statistics (NBS) revealed that the Gross Domestic Product (GDP) of the world’s second-largest economy grew by 2.3 per cent, expanding to USD 15.42 trillion in dollar terms in 2020. While still reeling with the after-effects of the coronavirus pandemic, the communist state recorded its lowest economic growth in 45 years. The report also added that in the local currency, the GDP exceeded the 100-trillion-yuan (USD 15.42 trillion) threshold to 101.5986 trillion yuan. 

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