China struggled for years to curtail its rapid population growth. Now that its population is declining, economists and others fear serious implications for China and countries around the world.
By Nicole Hong
Jan. 18, 2023Updated 4:31 a.m. ET
3 min read
New data released this week by the Chinese government revealed that China’s population has begun to shrink, a momentous shift that will have broad ripple effects both domestically and globally.
The government said on Tuesday that deaths last year in China had outnumbered births for the first time in decades.
This could spell the end of China’s position as the world’s most populous country, a transition that could profoundly reshape the global economy in the long run. India’s total population is expected to surpass China’s later this year, according to a recent estimate from the United Nations…[end quote]
China is a totalitarian country. Their draconian “one child policy” led to the current situation of a shrinking young population while they have a large and long-lived elderly population with a young retirement age (60), dependent on government pensions for support. Due to cultural reasons, the “one child policy” led to an imbalance of males over females. The relatively few young women are not responding to government incentives to increase family size. Educated Chinese women are increasingly delaying marriage and choosing not to have children, deterred by the high cost of housing and education.
How will India’s position as the most populous country affect the Macro economy?
India is a democracy. India has tremendous cultural diversity.
#415 million exited poverty in India in 15 years: UNDP
The Times of India, Oct. 18, 2022
As many as 415 million people exited multidimensional poverty in India in 15 years …
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Total poverty in India is 16.4% but this average disguise immense differences in the poverty rate. Kerala has < 1% poverty while Bihar has 35% poverty. India has the largest poor population of any country, about 230 million. But their success over 15 years in reducing poverty from 55% to 16% over 15 years is a striking achievement. Over that same 15 years, India’s population growth rate has slowed to under 1% per year.
In 2022, the median age of an Indian was 28.7 years, compared to 38.4 for China and 48.6 for Japan; and, by 2030; India’s dependency ratio will be just over 0.4. However, the number of children in India peaked more than a decade ago and is now falling. [end quote]
With its relatively young population, it will take a few decades for India to have the same problem as China (and Japan, the U.S. and Europe) of too many elderly being supported by too few young.
From an investment standpoint, what is the impact on U.S. companies from the changing economic and demographic situation in China and India?
Companies are already moving their production from China to lower-cost manufacturing countries with less political sensitivity, such as Vietnam and Mexico. Will this significantly increase manufacturing and supply chain costs or will the transition be relatively seamless? What will be the impact on consumer prices (inflation) in the U.S.?
Will India become a significant consumer of U.S. exports? The depth of poverty of India’s poor is truly intense. Clean water, sanitation, cooking fuel, electricity and housing are their concerns, not consumer goods and services. But India’s economy is growing well although the growth is forecast to slow in 2023 along with the rest of the world economy. If India’s past success in reducing poverty continues, India may become a significant export market in the future.
The headline news about China’s population shrinking will surely lead to at least a couple of decades of real hardship in China.
China’s growth story in the past 20 years has been extremely good for the U.S. Their low-cost exports and willingness to buy U.S. Treasury debt with their USD profits kept inflation and long-term interest rates low in the U.S. for that time.
Will this situation continue? Will India step in to replace China?
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