China’s Economy Faces Decades-Low Growth and Demographic Decline
China’s economy experienced its worst annual performance in over three decades, according to official figures released by China’s National Bureau of Statistics (NBS) on Wednesday, January 17. The GDP expanded by 5.2% to reach 126 trillion yuan ($17.6 trillion), marking China’s weakest performance since 1990, excluding the pandemic-impacted years.
The economic struggles of the country stem from various factors, including a crippling property crisis, sluggish consumption, and global turmoil. Despite the political nature of official GDP figures, they remain a significant source of insight into the health of the world’s second-largest economy. Last year’s growth rate improvement from 3% in 2022 can be attributed to the easing of strict health measures imposed to contain Covid-19.
After the lifting of pandemic restrictions at the end of 2022, Beijing set a growth target of around five percent for 2023. Initially, the economy rebounded, but it lost momentum within months due to a lack of confidence among households and businesses, which severely impacted consumption.
China’s growth engine has also been hindered by a real estate crisis, record youth unemployment, a global slowdown, and falling exports. Geopolitical tensions with the United States, along with efforts by Western nations to reduce dependence on China or diversify their supply chains, have further contributed to the economic downturn.
The NBS also reported a population decline that accelerated in 2023, exacerbating a downward trajectory that has lasted for over six decades and reinforcing concerns over a looming demographic crisis. China, which was once the world’s most populous country, was overtaken by India last year. In response, Beijing has implemented measures to counter falling birth rates, such as subsidies and pro-fertility propaganda. However, the decline in population continues.
By the end of 2023, China’s population stood at 1,409.67 million, representing a decrease of 2.08 million compared to the previous year. This decline was more than double the drop reported in 2022 when 850,000 people were lost, leading to the country’s first population shrinkage since 1960. The NBS revealed that in 2023, the number of births reached 9.02 million, with a birth rate of 6.39 per thousand, down from 9.56 million births in 2022.
China had relaxed its strict one-child policy in 2016, allowing couples to have up to three children starting in 2021. However, this policy change has failed to reverse the demographic decline, with factors such as high cost of living, increased female workforce participation, and greater focus on higher education contributing to the falling birth rates.
As China’s economic growth slows to decades-low levels and its population declines, the country faces significant challenges ahead. Efforts to boost economic performance and reverse the demographic decline will be crucial for China to regain its footing as a global economic powerhouse. The upcoming release of the growth target for 2024 in March will shed further light on China’s economic prospects.
China’s economic struggles and demographic decline are not only of national concern but also have global implications. As the world closely watches China, its ability to revive its economy and address its demographic challenges will have far-reaching consequences.
