China: a shadow of itself

China has become one of the most expensive countries in the world to raise and support a family. The collapse of consumption and overall living standards is wreaking havoc among young Chinese couples, who now have little motivation to start a family. Chinese fertility is declining rapidly despite the pro-natalist policy adopted by the government in 2021, which encourages families to have three children. However, this policy has had little effect, as fertility (or the desire for children) remains one of the few aspects that the Chinese authorities struggle to control. As a result, the demographic decline is expected to persist and may even accelerate over time.

The Chinese population is projected to dramatically decrease to 800 million individuals by the end of the century, compared to the current 1.4 billion, according to the United Nations. Bleaker predictions by statisticians, suggesting that the population would cease to replenish itself by 2029, were contradicted by an even more grim reality, as this tipping point of birth and death equality occurred as early as last year, in 2022. The situation is so severe that one must look back to medieval times of famines and epidemics to find population losses of this magnitude.

So, have analysts, experts, and policymakers been engaging in fearmongering by overestimating China’s economic power, similar to how their predecessors did with Sputnik-era Russia in the 1960s and Japan’s electronic prowess in the 1990s? It seems certain that China will need at least a generation to reach the American level, given how it continues to interfere politically with its industrial and technological leaders. The Communist Party and national security are far ahead of any other concerns for Chinese leaders. In accordance with these priorities, economic growth is asked to step aside if it means preserving or strengthening political control, maintaining the social status quo, and increasing influence abroad.

The recent charm offensive aimed at encouraging Western businessmen and companies has not gained much traction, especially in a context where foreigner arrests and intrusions into established companies within the country are effectively freezing foreign investment and strongly discouraging visits. By imposing the Party’s absolute control over education, technology, entertainment, and more, Xi has succeeded in stifling Chinese innovation. This approach has also alienated countries like Australia, South Korea, and Italy, which have been dismayed and disgusted by the iron-fisted approach and coercive measures. As the Party places much higher value on power than on the economy, it’s easy to understand that China’s current (economic) troubles and forthcoming (demographic) challenges are political and ideological in nature.

None of the plans aimed at stimulating its economy will succeed in the face of the now evident disconnect between officials and the private sector. How can one invest, innovate, and succeed when this regime exhibits one of the traditional shortcomings of authoritarian regimes, namely unpredictability?