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China loses ‘population No. 1’ to India… “World Economic Impact”

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Although China is preparing various measures to overcome the low birth rate problem, the population is shrinking. India is expected to overtake China to become the world’s most populous country by the end of this year. Significant ripple effects are expected worldwide.

The New York Times (NYT) reported on the 19th (local time) that “China’s population decline will have a major impact on the world.”

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◆United Nations Population Fund, India’s population of 1.4286 billion in the middle of this year… 1 in the world, overtaking China

The UN Population Fund predicts that India’s population will reach 1.4286 billion by mid-year, overtaking China’s by 3 million (1.4257 billion). In 2050, India’s population will continue to grow to 16 people and 68 million people, but China is expected to widen the gap to 1.317 billion people.

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China’s population declined for the first time in 61 years last year. The long-standing birth control policy, the burden of living expenses, and a change in the way of thinking about marriage are cited as the causes. China currently allows women to have up to three children and is taking various measures, but the low birth rate continues.

◆ ‘Factory of the world’ relocated to Vietnam and Mexico… Chinese consumption decline

The New York Times pointed out that China’s shrinking labor force could destabilize the global economy.

For years, cheap labor has made China the ‘Factory of the World’. But in the long term, a shrinking population of young people will create a shortage of factory workers in China, driving up labor costs. This could exacerbate inflation in a country that relies heavily on imported Chinese goods. Already facing rising labor costs in China, many companies are moving factories to Vietnam and Mexico.

A declining population could also lead to a decline in China’s consumer spending. Analysts say that it will threaten global brands that have relied on sales in China, from Apple smartphones to Nike sneakers.

In the short term, the low birth rate is expected to pose a major threat to China’s real estate sector, which accounts for a quarter of China’s economic output. Population growth is a key driver of housing demand. Already, the Chinese real estate market is stagnating due to the Hengda Group scandal, weighing down the Chinese economy.

China’s labor force continues to decline, but its rapidly aging population is also a problem. A 2019 report by the Chinese Academy of Social Sciences predicted that China’s main pension fund would be depleted by 2035 due to a shrinking labor force.

China introduced the ‘one-child policy’ in the late 1970s with the goal of curbing population growth. Penalties for violating the policy have forced hundreds of millions of Chinese women to have abortions. In addition, there is a clear preference for boys in China, which has resulted in a huge gender imbalance.

Since then, China has abolished its one-child policy and allowed three children in 2021, but experts say it is already too late to reverse the trend of population decline.

◆India, high growth expectations… “A country ready to work”

On the other hand, expectations for high growth are growing as India is projected to overtake China to become the world’s most populous country. With more than two-thirds of the total Indian population aged between 15 and 59, the NYT said, “India is a country ready to work.”

However, limitations are also pointed out. India’s population has grown rapidly in recent years, but jobs have not increased as much.

India needs around 9 million new jobs each year to keep pace with population growth. The lack of jobs could exacerbate India’s unequal society.

Additionally, India has one of the lowest rates of female employment in the world. The NYT pointed out that the economy cannot fulfill its potential if women’s participation in economic activities is low.

Meanwhile, the International Monetary Fund (IMF) projects that by 2028, China’s contribution to global gross domestic product (GDP) growth will reach 22.6%. It was followed by India (12.9%) and the United States (11.3%).

Source: Donga

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