China’s Demographic Composition Is An Indicator Of Decline, Not Dominance

China and the United States may suffer from the same problems, but the solution is not the same

If the population of countries were the main factor in determining the course of history, China might have invaded Europe in the fifteenth century, and Britain could not have occupied India in the eighteenth century. Therefore, population distribution does not determine the destinies of countries.

Small countries can do great things. With a population that probably did not exceed 1.3 million people in the mid-18th century, Scotland made major contributions to the Enlightenment, the Industrial Revolution, and the expansion of the British Empire. It may also be that large countries do not matter much, as despite it being the fourth largest country in the world in terms of population, most Americans are barely aware of the existence of Indonesia.

I was pleased to attend the annual meeting of the Aspen Economic Strategy Group, the younger sister of the older Aspen Strategy Group, last week. I went there expecting the debate between critics of the Fed and its current leadership to liven up the meeting. I wasn’t disappointed by it, but the main event turned out to be a discussion of a troubling line of research on US demographic trends and their implications, which turned out to be important; Rather, it seemed somewhat dangerous at first glance.

Reasons For Decline

The growth rate of the United States population has been trending downward for nearly two decades. The resident population increased by only 0.1% in 2021, the slowest increase the country has seen in peacetime, and far below the roughly 1% annual growth recorded between the 1970s and the beginning of the financial crisis in 2008. This slowdown is the result of a combination of three forces: rising mortality, falling fertility, and declining net international migration.

The first is the least surprising, as the United States performed relatively poorly during the “Covid-19” pandemic, as is known, causing the death of more than a million people. Contributing to that factor is also well-known, but in many ways more shocking, data compiled by Princeton University economists Anne Case and Angus Deaton on “deaths of despair,” which include deaths from drug overdoses.

The fertility decline is less pronounced, Melissa Kearney of the University of Maryland and Philip Levine of Wellesley College show in a new paper for the Aspen Economic Strategy Group.

The general fertility rate (the number of live births annually per thousand women of reproductive age) fluctuated between 1980 and 2007 within a narrow range ranging between 65 and 70.3. This ratio has since decreased to 56.6 in 2021. The decline in the general fertility rate indicates a decline in the current period’s total fertility rate, which calculates the number of births expected over a lifetime assuming that women will continue to have children in the same current proportions determined by age groups over the years of childbearing. This is the most important criterion for population growth. The total fertility rate in the United States has fallen from 2.12 in 2007 to approximately 1.65 between 2020 and 2021, its lowest levels ever. The total fertility rate has been continuously below the compensation ratio of 2.1 since 2007.

Two Children Are Not Enough

If the average woman gives birth to fewer than two children, the population will almost certainly decline, other things being equal. Surprisingly, fertility decline has affected almost all reproductive ages, ethnic groups and levels of education. Researchers Kearney and Levin reviewed the various theories proposed to explain the reproductive crisis and refuted most of them. For example, if it had just been a recession, or as economist James Carville famously phrased it in 1992, “it’s the economy, stupid,” the fertility rate would have recovered as the economy slowly recovered after the financial crisis. As for the theory that women are restricting family size because they are concerned about climate change, “the states that saw an increase in climate change searches via Google are not the states where the number of births decreased the most.”

The study’s authors argue that couples choose to have smaller families because of different priorities. For example, women want to pay more attention to their careers, and couples’ views on parenting have changed, making raising children more expensive and time-consuming than it was nearly 25 years ago.

Kearney and Levin also argue from the experience of other countries that “pro-natal policies, such as increasing child tax credits or more generous subsidies for child care, may have a modest effect on total fertility in the United States at best, and are unlikely to help raise it.” to the level of compensation. The same applies to measures to restrict women’s access to abortion nationwide after the Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization, which overturned Roe v. Wade. v. Wade).

Immigration Is The Solution

In other words, there is no end in sight to the reproductive crisis, which could portend an even greater decline because “a prolonged decline in total fertility of this magnitude in the United States would lead to slower population growth, which in turn could slow economic growth and exacerbate fiscal challenges.” The latter include challenges facing the Social Security Administration, as it is betting on an increase in the fertility rate to keep its deficit resulting from life expectancy under control.

But what about immigration, the catalyst for population growth in North America since the 17th century? The news in this regard is not much better due to the decline in immigration, contrary to what you might think when watching Fox News.

“Annual net inflows of immigrants have declined since 2016, and the foreign-born population has stabilized in recent years,” said Tara Watson of Williams College in the following research for Aspen Economic Strategies Group. “While annual net immigration into the country exceeded 1 million people less than decade, but this number has declined sharply, as the United States Census Bureau reported that the net migration rate reached 477,000 people in 2019, and only 247,000 people in 2020.”

This decline is partly due to “political decisions and rhetoric under Trump, as well as Covid restrictions,” but the gradual collapse in various channels for legal immigration has also played a role. Here is some evidence of the poor functioning of the current immigration system:

First: “As of May 2022, applications submitted before December 2014 are being processed in most countries by adult, unmarried children of Americans, and it is non-urgent applications for relatives that are given the highest priority.”

Second: The maximum threshold for immigration applications accepted to work in the United States in 1990 was set at 140,000 applications annually. “The country-by-country caps also go back to 1990. So there are more than 700,000 potential Indian immigrants who have been sponsored by their employer, but their applications are still waiting for their turn to be approved.”

Third: “The backlog of pending residency applications and other permanent adjustment of status applications has increased from 3 million in 2013 to 8.4 million in 2022, in addition to the backlog of similar applications related to temporary visas, with nearly half a million people waiting to schedule appointments to obtain their visas. “Almost 1.6 million cases are being decided in the Immigration Court, three times as many cases as in 2016.”

A Ruined System

Therefore, describing the American immigration system as “broken” is an understatement because it is a broken system based on the aforementioned evidence. However, no significant legislative change has been achieved since 1996, despite repeatedly failed efforts to reach bipartisan consensus on amending it. Also, 38% of Americans prefer to reduce immigration rates, while 27% of them want to increase them, according to Gallup.

This, I repeat, is not good for the economy. Watson points out that the tendency of immigrants to come to the United States in search of work means that “foreign-born Americans tend to participate in the labor force at a higher rate than native-born Americans.” Although unskilled U.S.-born workers may lose out to their immigrant competitors, “immigrant inflows produce positive or no effects on the average wages of workers in the United States, and immigrant workers even make many of their American counterparts more productive by freeing up For more specialization.

Most importantly, immigrants are disproportionately innovative and pioneering. “Immigrant inventors represent 23% of all patents granted, and these patents have a higher economic value on average than their counterparts granted to inventors born in the United States. It is noteworthy that the first generation of immigrants founded about a quarter of new companies in the United States, in addition to the founding by immigrants or their children.” Immigrants account for about 45% of companies on the Fortune 500 list.

Trends such as declining fertility, an aging and somewhat ill-health population, and a scarcity of skilled immigrants can only exacerbate the United States’ difficult fiscal problems.

The rising costs of Social Security and Medicare relative to GDP, exacerbated by rising health care costs, have been the main driver of the federal budget deficits that have characterized this century as is well known. No one should underestimate the magnitude of the problems that await us in the future in the absence of financial balance. The Congressional Budget Office expects net interest payments on federal debt to rise from 1.6% of GDP now to 8.2% by 2050.

Is America In Decline?

I left sunny Aspen more pessimistic about the country’s prospects than I was when I arrived. Not only are we experiencing the worst inflation since the last phase of the “Great Inflation” between 1982 and 1986; Indeed, demographic trends are working hard against us. This makes it a fantasy to expect productivity growth to improve significantly to save us, especially as procedural mechanisms related to economic activities, such as the creation of a new company and the redeployment of labor, decline.

Does all this mean that those who said America’s “decline” were right and that our best years are behind us? Is it only a matter of time before we all acknowledge that the “post-American world” is here, and that the “Chinese Century” has already begun? Should we admit defeat and withdraw, letting China take over Taiwan?

Well, we shouldn’t give up because if you think we have problems, I can assure you that what America’s main competition has is not just worse, it’s much worse. Unlike our problems, the solution for the United States, which is to reform the immigration system as other English-speaking regions have done, is not a solution to China’s problems.

In its latest edition of the World Population Prospects report, the United Nations Department of Economic Affairs presents different possible scenarios for population growth in different countries. In the case of the United States, the country will see its population decline by 16% by the end of the century, from the current 336.5 million to approximately 280 million, according to expectations of a decline in fertility and a halt in immigration in a “zero immigration” scenario. But this is not the base case for the UN: adjusting the fertility variable to the mean would increase the US population by 17% to 394 million by 2100, and 541 million in the high fertility scenario.

By contrast, the United Nations does not present any scenario that does not involve a decline in China’s population, projecting it to decline by a fifth at best. The United Nations predicts population density in the base case to decline by 46% to 771 million people, and by about two-thirds to 494 million in the worst-case scenario. You’ll note that this would be less than the total US population by the end of the century in the high fertility scenario.

The Chinese Impasse

This is a major reconsideration from the United Nations, noted Nicholas Eberstadt and Peter Van Ness of the American Enterprise Institute for Public Policy Research. In the same report version twenty years ago, the international organization expected that China’s population would rise from 1.28 billion in 2001 to 1.43 billion this year, and then continue Chinese population growth to reach a peak of 1.45 billion in 2031, which was still present in the 2019 World Population Prospects report. As for now, China will reach the peak of population growth in just two years, according to the latest average projections of the United Nations, and the population in 2050 will be 100 million fewer than its previous projections.

Covid, or any other cause of increased deaths, certainly did not cause this decline. The main reason for the change can be found in the latest birth data published by China’s National Bureau of Statistics, which indicates a “sudden and rapid decline” in birth numbers since 2016, Eberstadt and Van Ness said. The irony in this context is that 2016 was the year in which the replacement of the one-child policy, introduced by Deng Xiaoping in 1979, with the two-child policy was implemented. Which actually makes the timing “weird, as well as unexpected.” So what’s going on?

The Chinese government has stopped denying that it has a demographic problem. Yang Wenzhuang, head of the population sector of the National Health Commission, admitted last month that his country’s population would begin to shrink before 2025, according to a report in the state-run Global Times newspaper. Huang Wenchang of the Center for China and Globalization was quoted as saying: “This is an inevitable consequence of prolonged fertility decline. Therefore, China’s birth rate can be expected to continue to shrink for more than a century.”

But even this admission understates the scale of the problem, according to Yi Fuxian of the University of Wisconsin in Madison, who has argued for years that we should not trust official birth statistics in China. Fuxian had predicted in his book Big Country with an Empty Nest, which China banned when it was published in 2007, that the Chinese population would begin to shrink in 2017, not the early 2030s. Yi argued in 2019, based on vaccination data and other data, that the number China’s population began to decline in 2018, one year after he estimated, and his predictions have now been proven correct.

The Shanghai Police Department mistakenly leaked the records of more than a billion Chinese citizens earlier this summer, and then an anonymous hacker posted a sample of about 750,000 of the stolen records. Yi said his analysis of the leaked sample led him to conclude “that birth rates after 1990 continued to decline faster than he expected, and that they did not actually peak in 2004 or 2011, meaning that China’s true population is not 1.41 billion (the official census); This is lower than its estimate of 1.28 billion.

Obstacles To Childbearing

The Chinese government, like many governments around the world, is trying to confront the reproductive crisis. The central government announced in May 2021 that all couples would be allowed to have up to three children, and launched a nationwide campaign to increase the number of affordable nursery places. New measures at the local level include tax deductions on expenses for children under 3, fertility benefits, extended maternity leave and favorable housing policies for couples with more than one child, according to People’s Daily.

However, such incentives are unlikely to be more successful in China than they have been in other regions of East Asia that have witnessed similar declines in fertility rates in the past, including Taiwan and South Korea. Root causes include, as in the United States, increased educational and employment opportunities for women relative to the perceived costs of raising children. However, the causes of China’s reproductive crisis differ.

First, marriage itself is an outdated idea, with 44% of young urban women between the ages of 18 and 26 saying they do not plan to marry, compared with 25% of urban young men, according to a 2021 survey by the Communist Youth League. Reasons: 61% of participants said that “it is difficult to find the right person,” while 46% said that “the financial cost of marriage [was] too high,” and 34% said that they did not have “the time and energy needed to get married,” while about a third of participants said In the survey they simply “don’t believe in marriage”, an understandable sentiment.

On the other hand, the divorce rate has increased in China over the past twenty years, in contrast to the United States, which has witnessed a decline in divorce cases. All of this helps explain why the hashtag “Why don’t you get married?” has become so popular on China’s Weibo, where middle-aged Chinese parents are pressuring their children to get married.

But China faces another obstacle: the chronic population imbalance between men and women, which is a direct result of the selective abortion of female fetuses enabled by the one-child policy. There were 5.9 million more males than females in the newborn to 4-year-old category in 2018, while the ratio of men aged 15 to 29 years was 112 men for every 100 women in that age group. This imbalance will widen in the next decade.

Ophthalmia Is Better Than Blindness

In short, America has a fertility problem, but China has an actually worse one (since 1991), and while America has an aging population, China’s aging will soon get worse (starting in 2034).

Does this mean that the Chinese challenge to American superiority will simply fade away? not necessarily. Most of us have heard of Singles’ Day, which falls on November 11th. This Chinese celebration is currently the largest e-commerce event in the world. Combined sales of Alibaba Group Holding and its JD.com company reached $139 billion last year, setting a new record. But the celebration is actually called the “Holiday of Barren Branches” in Chinese.

The previous name does not belong to Chinese slang on the Internet, but rather is a term dating back to at least the Ming Dynasty, where it was used to describe an unmarried man who did not add more branches to the family tree. The barren branches of the Chinese Empire were often viewed as troublemakers; Even potential rebels. Western scholars, such as Valerie Hudson and Andrea den Boer, today consider China’s surplus of young people a potential cause of domestic and international conflict. Taiwan, beware.

You might think this just shows that Elon Musk was right again. In a conversation with Alibaba founder Jack Ma during the World Conference on Artificial Intelligence held in Shanghai in August 2019, the American billionaire touched on the reproductive crisis. “Most people think we have too many people on this planet, but that’s actually an outdated view,” Musk said. “Assuming there is a beneficial future in the shadow of artificial intelligence, the biggest problem the world will face in 20 years will be population collapse, not population collapse.” “Explosion…collapse.”

Ma replied: “I completely agree with that. The population problem will be [a big challenge]. 1.4 billion people in China sounds like a lot, but I think in the next 20 years we will see that this will bring big problems for China.” (You can see why he is no longer a favorite of President Xi Jinping.)

However, what was strange about this conversation was Musk’s next exposition, in which he said: “The common response is: Well, what about immigration? And from where?”

Africa Has The Solution

This question strangely omits Africa, Musk’s home country. It is important to remember that although the population trend in East Asia is severe, the United Nations does not expect a global population collapse within the next six decades, let alone two. The total global population, under the UN Medium Change Scenario, is still expected to rise from 7.88 billion this year to 10 billion in 2059, and will not peak until it reaches 10.43 billion in 2086. 95% of this projected increase will come from sub-Saharan Africa In Africa.

Even if Musk believes the most pessimistic UN scenario based on declining fertility, in which the world’s population begins to decline in 2054, the population of sub-Saharan Africa will continue to rise. It is not clear why there is no idea of ​​a mass migration from Africa to the rest of the world in either scenario. Either Musk expects African fertility to decline faster than most demographers, or he expects a disaster like the one envisioned by Thomas Malthus’ theory to hit Africa. This may be what he has in mind given the dire consequences of climate change across much of Africa.

But let us leave the discussion of the baby boom in Africa to another article. A reproductive crisis has emerged in most parts of the world, or is just around the corner. It’s just that some countries are suffering from the crisis more than others. If he reforms the immigration system, the United States will emerge from its rut ​​largely unaided. But this is not an option for China for the simple reason that none of the potential immigrants in the world wants to move there.

It is true that demographics do not determine the destinies of countries. But given the ongoing dispute over Taiwan, it is not insignificant.

Source: CNBC World
Poppy Harlow
Opinion Article