China reported a record low birth rate in 2023 as its population shrank for the second year in a row. The trend marked the deepening of a demographic challenge set to have significant implications on the world’s second largest economy.
The country recorded 6.39 births per 1,000 people, down from 6.77 a year earlier, China’s National Bureau of Statistics (NBS) announced Wednesday. The birth rate is the lowest since the founding of Communist China in 1949.
Some 9.02 million babies were born, compared with 9.56 million babies in 2022. The overall population fell in 2023 to 1.409 billion, down 2.08 million people from the previous year, the bureau said.
“To be sure, last year’s sharp decline should be partly due to the lockdowns and most likely new births will rebound in 2024, although the structural down-trend remains unchanged,” said Larry Hu, chief China economist for Macquarie Group.
The country’s demographic shift comes at a time when its growth is sputtering. The NBS confirmed that China’s economy grew by 5.2% last year, compared to a government target of around 5%.
While this expansion marks a significant pick-up over 2022, when China’s economy grew by just 3%, it is still one of the country’s worst economic performances in over three decades.
Chinese stocks tumbled on Wednesday following the data release. Hong Kong’s Hang Seng Index sank 4.1% by mid-afternoon, heading towards its lowest closing level since October 2022. The CSI300, which consists of 300 major stocks listed in Shanghai and Shenzhen, fell 2.2%. Both indexes had a dismal year in 2023, down more than 10% each.
China has been beset by a series of economic problems, including investor exodus and deflation. The shrinking population will now force Beijing to make some structural changes in its economy and reshape sectors including healthcare and housing.
Wednesday’s data wasn’t entirely gloomy. In the fourth quarter, China’s GDP expanded 5.2%, accelerating from the third quarter’s 4.9% growth. However, this boost may not be long-term, experts said.
“There are two key drivers behind this: the unexpected, but short-lived release of pent-up demand during the [third quarter] holidays, and the low base effect of [fourth quarter] 2022,” said Alfredo Montufar-Helu, head of the China Center for Economics and Business at the Conference Board.
He believes China’s GDP growth will decelerate to 4.1% in 2024 because of several significant headwinds to growth, including the ongoing property downturn and subdued consumption.
In December, new home prices fell by the highest amount in nearly nine years, according to a Reuters calculation based on NBS data, and property investment slumped 9.6% in 2023 from the previous year, marking a second straight year of declines.
The latest figures come after China’s population declined for the first time in decades in 2022 in what analysts said was the country’s first drop since the 1961 famine triggered by former leader Mao Zedong’s Great Leap Forward. Last year, China was surpassed by India as the world’s most populous country.
The slowing birth rate comes despite a push from the government to encourage more married couples to have children following decades of restrictive birth policies.
“There are fewer people getting married and fewer couples want to have children,” said Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations (CFR) in New York.
The Covid-19 pandemic also likely affected the existing trend “because of (its) impact on the economy – the economic slowdown, the high unemployment rate among young people – all of that has discouraged people to get married and have kids,” he said.
The falling birth rate coincides with a shrinking workforce and a rapidly aging population: twin challenges for China’s government as it grapples with funding healthcare and pensions for elderly citizens, while aiming to maintain growth in an economy manned by fewer people of working age.
The ‘silver economy’
China’s working population, classified as those between the ages of 16 and 59, declined by 10.75 million last year, adding to an ongoing contraction. The population of those over 60, meanwhile, continued to expand. More than one-fifth of the population, or nearly 297 million people, are now in that age bracket.
China’s top administrative body, the State Council, last week released guidelines to strengthen the so-called “silver economy,” as part of top-down efforts to tackle the challenges of caring for a growing number of elderly.
The guidelines call on companies across sectors including housing, healthcare and finance to tailor services and products for the elderly. Land development and local government financing should support facilities for aging residents, it added.
The call to grow the “silver economy” follows protests in at least four cities last year, where thousands of elderly took to the streets to protest cuts to monthly medical benefits made as local government grappled with deficits.
China’s death rate and number of fatalities also rose in 2023 compared with the previous year, according to data released Wednesday. Authorities reported a death rate of 7.87 per thousand people and 11.1 million deaths. In 2022, there were 10.41 million deaths with a death rate of 7.37 per thousand.
Last year, China experienced a major outbreak of Covid-19, with infections sweeping across the country starting in late 2022 following the abrupt relaxation of stringent pandemic controls. Experts say China has not released comprehensive data on fatalities, even as authorities have defended their Covid-19 data transparency.
The increase of 690,000 deaths last year compared with 2022 is “noteworthy” when contrasted with smaller, incremental rises during pre-pandemic years, according to CFR’s Huang.
The comparison highlights a marked escalation in fatalities during the Covid era, he said. However, the latest data “might not fully capture the actual number of Covid-related deaths,” he added, pointing to how the total increase in deaths between this year and last falls short of scientific estimates of fatalities during China’s re-opening.
Return of youth unemployment data
In a surprise move, the NBS brought back the monthly youth unemployment rate after a five-month hiatus.
In August, the NBS suspended the release of data on joblessness among young people, after the figure hit consecutive record highs around 21% amid a broader economic slump. It said the methodology needed to be improved.
In December, the jobless rate for 16- to 24-year olds stood at 14.9%, it said Wednesday. The figure excluded some 62 million students, whose main task should be “to study” rather than looking for jobs, the NBS said.
It also added a new unemployment category for people in the 25 to 29 age group, which reached 6.1% in December.
The real estate crisis, which is at the heart of many of China’s economic problems, has persisted.
Home sales by square footage fell by 8.5% in 2023, marking the second straight year of decline, and sentiment among investors remained weak.
Property investment slumped 9.6% in 2023 compared to 2022, which was also the second consecutive year of contraction.
The property sector has played an outsized role in the Chinese economy, accounting for as much as 30% of GDP. Housing assets make up about 70%, the biggest proportion, of household wealth.
Land sales to developers had accounted for more than 40% of local government income in the years before 2021. The sector fell into crisis about three years ago after a government-led clampdown on developers’ borrowing.
Due to the aging population, analysts widely expect housing demand to wane in the coming years, which will drag down the property industry and affect growth prospects.
There were some other bright spots in Wednesday’s data though.
Industrial production jumped 6.8% in December, which was better than expectations. It was the fastest growth since February 2022. For 2023, factory output rose 4.6%, faster than 2022’s 3.6% increase.
Fixed-asset investment also came in above market forecasts, up 3% in December from a year earlier.
Retail sales increased 7.4% in 2023, reversing the 0.2% drop in 2022. But December retail sales rose 7.4% from a year ago, missing expectations of 8% growth. That slowdown was mostly driven by slower growth in car and medicine sales.
The mixed data point to the need for more stimulus measures from the government, analysts said.
“Policy easing will continue to be desperately needed to ensure the economic recovery is secured in 2024,” said Carlos Casanova, senior economist for Asia at UBP, a Swiss private bank.
