ANZ predicts that China’s working-age population will be below the global average by 2035, and that the proportion of older people will exceed that of the United States by 2045. The picture shows a nursing home in China.
The Chinese Communist Party has been slow to release the results of this year’s census, and experts from around the world have suggested that there is a big mystery. It is generally believed that the census will show the first population decline since 1949. Raymond Yeung, chief economist at ANZ Bank, said earlier that China’s shrinking labor force will cause the country’s savings rate to fall, further impacting China’s ability to buy U.S. Treasuries and possibly intensifying the technology race between the United States and China.
Yang pointed out that the demographic composition of China’s population may be more important than its population size. ANZ predicts that China’s working-age population will be below the global average by 2035, and that the proportion of older people will exceed that of the United States by 2045.
Although China accounts for 22 percent of the global workforce, the country’s demographic advantage peaked in 2011. ANZ notes that the size of its workforce has fallen to 2006 levels in 2020, at about 771 million.
Changes in China’s ability to provide the majority of the global workforce could have far-reaching implications. Yang noted that an aging population is likely to lead to a decline in China’s high national savings rate, which has been a major driver of its economic expansion.
The country’s national savings have been key to its ability to fund the U.S. fiscal debt and could indicate a possible move toward financial decoupling between the U.S. and China. ANZ predicts that interest rates could rise as national savings decline. This, coupled with a shrinking labor force, may encourage multinational companies to reconsider their geographic location choices and realign their global business portfolios.
Low-yielding domestic investment opportunities within China may also lead Chinese investors to seek higher-yielding investment opportunities in overseas markets, where chasing overseas yields has become a long-term trend. The shrinking labor force in China may also intensify the technology race between the U.S. and China. China will attempt to mitigate labor shortages and sustain economic growth through technology and innovation.
ANZ notes that the U.S. plans to invest $50 billion in semiconductor manufacturing and research to outpace China and develop technologies related to batteries, biotechnology, computer chips and clean energy. ANZ concludes that the U.S. emergence as a global leader in future technologies, particularly semiconductor production, creates a barrier to China’s technological pursuits.
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