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China's Economic Crisis Deepens as Population Decline Accelerates

China's economic woes are intensifying as recent data reveals a substantial decline in the country's population for the second consecutive year. The economic challenges are exacerbated by the devastating impact of Covid-19, a record low birth rate, and a rapidly aging population, collectively posing significant threats to China's economic stability.


The Covid-19 pandemic has played a pivotal role in China's economic downturn. After three years of stringent quarantine measures, the sudden relaxation of restrictions led to a surge in virus cases at the beginning of 2023. The result was a staggering death toll of 11.1 million – the highest since 1974 during the Cultural Revolution. This unprecedented loss of life has contributed significantly to China's population decline.


Despite the lifting of the one-child policy nearly a decade ago, China's birth rate continues to plummet. Zhou Yun, a demographer from the University of Michigan, notes that fertility decline is challenging to reverse. Even traditionally auspicious years, such as 2024, the Year of the Dragon, have failed to boost childbirth rates significantly. The implications are dire, with a shrinking working-age population and increased burdens on elderly care and pensions.


The economic repercussions of China's shrinking population are far-reaching. With almost 300 million people aged 60 or above, the country faces a potential decline of 109 million in total population by 2050, according to UN experts. A diminished workforce and consumer base, coupled with rising elderly care costs and pension payouts, pose severe challenges to China's economic future.


China's National Bureau of Statistics reports that the country's economy grew at its slowest rate in decades at 5.2 percent. Furthermore, predictions from the state-run Chinese Academy of Sciences suggest that the pension pot could run out of funds by 2035, with a staggering 400 million retirees to support. The economic outlook remains grim, with falling wages, a property market crisis, and a youth unemployment rate of 21.3 percent, pointing towards a challenging path ahead.


Despite President Xi Jinping's efforts, such as the extension of maternity leave and a crackdown on abortion, couples remain reluctant to have more children due to economic uncertainty. Professor Stuart Gietel-Basten, a population policy expert, highlights that China's fertility rates are among the lowest globally, signaling a new era of population stagnation or decline that the country seems locked into.


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