On January 17, China’s National Bureau of Statistics (NBS) said that the country’s population was estimated to be 1.41 billion as on Dec 31, 2022, falling by 850,000 from the year before. While 2022 is not the first year of an annual decline in China’s population, it is the first since 1961, and there is more evidence to show that it is symptomatic of a larger demographic milestone than exogenous shocks. Here are four charts that explain the significance of this development in detail.

China registers a fall in population after 61 years…

NBS provides annual population estimates for China from 1950 onwards. The latest data shows that China’s population saw a year-on-year decline in 2022 for the first time after suffering back-to-back declines in 1960 and 1961. To be sure, it needs to kept in mind that the fall in Chinese population in the 1960s was a result of the famine unleashed by Mao Zedong’s policy, the Great Leap Forward, which tried to achieve a forced industrialisation of the Chinese economy.

See Chart 1: China’s population and annual change (secondary axis)

…but this was widely expected

The decline in China’s population in 2022 is entirely on expected lines. A 2022 United Nations estimates projected a decline in Chinese population in 2022 and also projected that India will replace China as the most populous country in the world in mid-2023. A simple comparison of China’s decadal population growth shows that the rate has been coming down since the 1970-79 decade. UN estimates show that the Chinese population will continue to decline from now on and its share in world population will decline from 18% in 2021, to 13% in 2050 and to 7% by 2100, the last year for which these projections are available.

See Chart 2: CAGR of China’s population growth

Chart 3: China and India share in world population

Birth control; first state driven and then market driven, explains China’s population trajectory

“Please have more babies. That’s China’s message for couples after decades of limiting most families to just one child”, said a Bloomberg story on the latest population estimate for China. A simple comparison of China’s birth rate and death rate – the latter has to be higher than the former for population to decline – shows that the deceleration, and the now decline, in the country’s population is a result of steady reduction in birth rate even as death rates have been largely stable over the last many decades. Ironical as it may sound, a decline in birth rates was initially seen as a success story by the Chinese state, which implemented a one-child policy in the early 1980s to control the country’s population. The Chinese government officially shifted to a two-child policy in 2016 and then allowed couples to have a third child in 2021. However, the birth rate has continued to decline. Among the most important reasons for the decline in Chinese birth rate is the fact that young couples are increasingly insecure about the economic costs of child bearing. “Time and financial concerns mean that many couples feel they can only afford to have one child — if any”, the Bloomberg story quoted above said.

See Chart 4: China’s birth and death rate

The economic consequences of depopulation for China

China’s economic transformation from a poor Asian country to the world’s second largest economy is perhaps the most fascinating rags-to-riches story in the history of modern capitalism. The origins of China’s impressive economic growth are to be found in its large, relatively well educated and cheap labour, which helped it establish itself as the factory of the world. An increasingly ageing and falling population means that China will find it difficult to find enough and cheaply available workers to drive its economic growth story. China’s economic anxieties over depopulation – various state policies from allowing more and more children to decisions such as banning online tuitions, which made bringing up children expensive, clearly betray the state’s concern – are a lesson for voices that see population control as a silver bullet for India. To be sure, the counterfactual is equally true. Had China not had a manufacturing revolution, widespread unemployment would have thrown the country into absolute chaos. As India stands on the cusp of becoming the most populous country in the world, it must guard against both extremes.