What does China’s declining population mean for business?

China’s latest demographic data was released by the National Bureau of Statistics on 17 January, showing that the country’s population fell for a second consecutive year. The latest data reinforces fears about the challenges a declining population will pose for the world’s second-largest economy, which has long relied on a plentiful and ambitious workforce to fuel its industrial and economic growth.

The population decline of 0.15% – or 2.08 million people – to 1.409 billion in 2023 was well over the 850,000-person drop seen in 2022, which was China’s first decline in population since 1961. Total new births fell 5.7% to 9.02 million in 2023, while deaths rose 6.6% to 11.1 million.

The country’s crude birth rate of 6.39 per 1,000 people puts it on a par with South Korea and Japan, which have been among the countries with the lowest birth rates for the past few decades (by comparison, the crude birth rates in the UK and US are around 10-11 per 1,000).

Fertility in China has been declining for decades but has been compounded in recent years by high youth unemployment, the high cost of things like housing and education, and the post-Covid economic downturn. GDP figures released at the same time as the population data showed that the Chinese economy grew 5.2% in 2023, the lowest rate since 1990 (excluding the main pandemic years). Gender discrimination and expectations that women will assume caregiving roles (both for children and elderly parents) are also discouraging women from having children.

The falling birth rate has already prompted action at the national policy level, including the end of the one-child policy (increased to three in 2022) and monthly or one-off payments for second or third children in several provincial cities. Some demographers – including the vice-president of the China Population Association – have speculated that we will see a small bump in the figures for this year as people like to have children born in the auspicious Chinese zodiac Year of the Dragon, which starts in February, but this is unlikely to have a major effect on the overall figures.

It is clear that China’s current strategies are doing little to encourage births, so it will have to turn its attention to the other end of the age spectrum: the ageing population.

As its population ages, China will have to rethink its economic structure while also considering issues such as the stress an older population will put on its healthcare and pension systems.

Indeed, on 15 January, the Chinese government unveiled a series of 26 guidelines to encourage the development of a “silver economy” catering to older people, who now account for 21.1% of the population. Health-related consumption is likely to account for the biggest share of spending in this “silver economy”, presenting opportunities for British companies in the pharmaceutical and biotech industries, as well as robotics and AI. Sales of home healthcare devices for older adults have already shown an increase during Singles’ Day in recent years, as have sales of dietary supplements and cosmetics with ‘anti-ageing’ properties.

The falling birth rate also prompts several considerations for British consumer brands looking at the China market. Young, childless urban residents remain a broad market with strong spending power. Instead of planning and saving for children, Gen Z and younger millennials are increasingly choosing to live life on their own terms and spend money on themselves, whether that be on hobbies and sports like camping, yoga and skiing, wellness and self-care products, or even on their pets.