China | The case for a risk reassessment

Why is this statement expressed with such confidence? Because China was the only country in the world to operate a “One Child” policy for over 35 years between 1979 and 2015, and the aftershocks of it are still there a decade after it was formally abandoned. It will determine the demography of China between 2026 and 2050. Even if a radically new approach to enhancing the population could be introduced and start working from right now (an improbable outcome), it would not have an impact of consequence for China until the third quarter of this century.

The One Child policy was, in part by accident, an initial success and a subsequent catastrophe. Strictly speaking it was only a One Child instruction in urban areas. It was acceptable to have two children in rural areas (particularly if the first child were a daughter). Some ethnic minorities were exempt from it altogether. It was a drastic but not completely unreasonable reaction to a very sharp increase in national numbers during the first three decades of Communist Party rule.

Three factors would lead it to become disastrously distorted. First, the proportion of all Chinese people living in urban areas tripled between 1980 and 2015 (from around 20% to 60%) meaning far more families fell inside the One Child policy scope than had been anticipated at its launch. Second, the financial incentives to respect the policy were such that even in many rural areas, a single child became the norm. Finally, the determination (and even outright ruthlessness) by which some parents would ensure that their child would be male was vastly underestimated.

The net result is that the China of 2026-2050 will exhibit the following demographic features.

First, China’s population is now falling. It was overtaken as the most populous country in the world by India in 2023 (possibly the first time it has not had that status for 5,000 years plus). The rate of depopulation is small as of 2025 (-0.15%), but this will accelerate to -0.25% by 2030, then -0.45% by 2040 and -0.7% come 2050.

Second, there is still a skewed sex ratio at birth, although it has fallen since the demise of the One Child rule. It will be about 110 boys for every 100 girls in 2025 (the natural rate is just under 105 to 100 as very young males have higher infant mortality than females). Yet, the effect of the previous decades of One Child is that in 2027 there will be 119 men for every 100 women in the age group where marriage and children would usually be expected. Huge numbers of men who might well like to marry (and start a family) will not have that opportunity. This is socially toxic.

Third, the fertility rate in China today is between 1.1 and 1.2 per adult woman. This is barely higher than it was at the zenith of the One Child exhortation and almost half of the figure (2.1 – “the replacement ratio”) that a country needs to maintain its population without substantial immigration. This is happening because of calculation, not compulsion. Outsiders tend to assume that as China is a Communist country there must be extensive public provision to support families and young children. In reality, even Shanghai is not Scandinavia. The cost of raising a child in China is estimated at seven times per capita GDP (it is around four times in the United States, lower still in Europe). There will be no baby boom in Beijing at any moment soon.

Fourth, and this is in many ways a triumph but one which comes with its challenges, China has a rapidly ageing population, and this is also baked in as a social force over the next 25 years. The percentage who are 65 years and over is about 14.7% now. It will move upwards to 18.2% in 2030 and an astonishing 30.1% in 2050. The percentage of the youngest cohorts will collapse.

Fifth, the by-product of the numbers above in that the “Old-Age Support Ratio” (those aged 20-64 compared with those aged 65 and over) will have been utterly transformed in living memory. It was a whopping 12.5 in 1965. It will have reduced to 4.3 by the end of this year, fall to 3.4 in 2030 and slump to 1.8 by 2050 (strikingly lower than the United States, Europe or elsewhere). This is compounded by the fact that most Chinese people retire well before the age of 65 and the proposals to increase the age of exiting the workforce by 2040 are woefully incremental. China already suffers from a shortage of consumer spending (in part because many people save for their old age as the present structure of pension provision is extremely patchy). A far older China will be even less inclined to splash out the cash on new expensive domestic durables.

What does all of this mean for the outside world (especially the corporate sector)? It means that China and its leaders are likely to be more focused on managing these massive internal changes and rebalancing the roles of the State, families and individuals, than they were from 2000 to 2025. It means that the date at which China surpasses the US to be the largest economy by nominal total GDP (once thought to be during this decade) is moving to the 2030s, 2040s, even 2050s. It also means that those who have convinced themselves that China is now intent on becoming a foreign policy and military force on the scale of the United States (invading Taiwan as it does) should reconsider that position. The time is ripe to look at China again on risk and on reward.

Dr Tim Hames is a co-founder and partner at Acuti Associates, a geopolitical consulting firm and the author of Trump II, Why He Won. What It Means For The World and the forthcoming War or Peace? The United States and China, 2026-2049.