April 29, 2021

Asia

CHINA: Alleged population decline is less than meets the eye

BY Gabriel Wildau

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( 4 mins)
  • China’s statistics bureau has denied a Financial Times report claiming that China’s yet-to-be released 2020 census shows a decline in population for the first time in 60 years.
  • Several technical issues cast doubt on the FT report; decennial census figures are not directly comparable to population estimates for non-census years.
  • But setting precise numbers aside, China faces massive challenges from demographic aging in the coming decades.

The Financial Times (FT) reported exclusively on 27 April that China’s 2020 census data will show a year-on-year decline in population, the first such decrease since the Great Famine of 1959-1961. Though China’s long-term challenges related to demographic aging are well known, the report suggests the problem is more severe than previously believed. The United Nations estimated in 2019 that China’s population would peak at 1.464bn in 2031. By contrast, the FT reports that the 2020 census shows the population falling below 1.4bn in 2020 after exceeding that threshold in 2019.

In a one-line statement on 29 April that was evidently a response to the FT, the statistics bureau said: “According to our understanding, in 2020, our country’s population continued to grow.” The bureau that detailed figures would be disclosed when the census results were published. Census results were due to be published in early April, but a spokesperson said on 16 April that “more preparation work” was required before data is released. That fueled suspicion that the census results were politically sensitive.

Though some suspicion over the delay is justified, the FT report should be treated with caution for several reasons. First, results from China’s national census, which occurs every 10 years, are not directly comparable to population estimates for non-census years. The latter are based on a sample survey covering only 0.1% of the population, combined with the results from the most recent full census. One possibility is that the 2020 census results will lead to downward revision of the population estimates for previous years, such that the full annual series, post-adjustment, will still show a modest increase for 2020.

In general, measuring population change is easier than measuring absolute levels. Looking at rates of change, an absolute population decline last year looks implausible, even accounting for the likely impact of Covid-19. In 2019, births totaled 14.65mn, while deaths were 9.98mn. For 2020, a separate data series on household registrations (hukou) suggests a 15% decline in births, implying that deaths would need to have risen by fully 25% to produce a population decline. Such a large jump in deaths appears unlikely.

A leading Chinese demographer based at University of California Irvine, Wang Feng, criticized the FT story by noting that the apparent population decline is likely based on initial census results that may later be adjusted upwards. Such census adjustments are standard: the 2000 census was adjusted upward by 1.8%, while the 2010 count was revised upward by 0.18%.

Second, even if one accepts the FT report at face value, the significance is largely symbolic. For the purposes of economic growth and the solvency of the pension system, the working-age population is more significant than total population. As measured by the number of people aged between 15 and 64, China’s working-age population peaked in 2013, according to official data. To be sure, fewer births in 2020 do imply a lower working-age population by 2035, but by this metric 2020 is not a special milestone.

Precise numbers aside, however, China faces massive challenges from demographic aging in the coming decades. The government is responding with policies to encourage household retirement savings, including through 401k-style tax-exempt savings plans. State pension plans, which are largely financed on a pay-as-you-go basis, face large long-term shortfalls that will be plugged through a combination of benefit cuts (including increases to the retirement age), tax increases, and sell-offs of state assets. Prior to the pandemic, local governments had also begun to tighten enforcement of the requirement that employers contribute to social security funds on behalf of employees. Finally, the 14th Five-Year Plan, which was approved in March and covers 2021-2025, calls for policies to support the development of the elder care industry, including healthcare facilities, nursing homes, and home-based services.

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