China’s population pressures to slow its economy, Lowy Institute says

“With 2 to 3 per cent growth, China’s future looks very different. China would still likely become the world’s largest economy. But it would never establish a meaningful lead over the US and would remain far less prosperous and productive per person than America, even by mid-century.”

The federal government last week announced plans to increase the size of the Australian Defense Force as it ramps up spending on defense capability in part to deal with emerging pressures out of China.

But Mr Rajah said the diminished size of China’s economy would reduce its ability to project military and diplomatic power.

“China would lack the economic heft needed to compete with major Western economies as a group, for example in terms of its ability to devote resources to science and innovation, military spending or financing overseas infrastructure projects,” he said.

While the most populous nation in the world, China’s overall population is starting to shrink.

Mr Rajah said by 2050, China’s working-age population would have fallen by 220 million from its current level. Its fertility rate was also falling and was now at 1.3 births per woman compared to a replacement level of 2.1.

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Not only would it have far fewer workers, but China’s average age would have skyrocketed, with more than a quarter of the population over the age of 65.

“The legacy of China’s draconian past population policies and its rapid demographic transition mean China’s population is set to shrink and age rapidly over the coming decades,” he said.

“With Chinese family preferences having seemingly shifted towards smaller sizes, lifting fertility will at minimum take time, with success in any case requiring around two decades to translate into an increase in available workers.”

Lowy found another handbrake on Chinese growth would be its low productivity growth relative to other nations.

It said productivity was slowing, in part to its decoupling from high productivity nations in the West.

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