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Minhaz Merchant

Minhaz Merchant is the biographer of Rajiv Gandhi and Aditya Birla and author of The New Clash of Civilizations (Rupa, 2014). He is founder of Sterling Newspapers Pvt. Ltd. which was acquired by the Indian Express group

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China’s Grey Future

The economic consequences of an ageing China are grim: as the productive workforce falls, GDP growth will slow

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China’s population isn’t just shrinking. It’s greying. Several young Chinese couples don’t want more than one child. Raising children is expensive – from education, right through school and university, to buying larger family homes. Increasing numbers of young Chinese women have full-time careers. As in the West, work often takes precedence over large families.

The economic consequences of an ageing China are grim: as the productive workforce falls, GDP growth will slow. For Indian policymakers China’s demographic decline can be a strategic weapon in dealing with Beijing’s territorial aggression.  Not enough attention has been paid by Indian analysts on how China’s demographic vulnerability can be used to counter Beijing’s hegemonic ambitions in the region.

Following the shooting down of a Chinese spy balloon airship by the United States, the Pentagon says Beijing has also spied on India and other countries with similar high-tech balloon airships. These are equipped with artificial intelligence (AI)-guided surveillance equipment and monitored real-time at military data centres in China.

Beijing, however, has moderated its “wolf diplomacy” after a backlash from several countries. China’s new foreign minister Qin Gang, the former ambassador to Washington, represents a marked change from his predecessor, the stentorian Wang Yi who has been pushed upstairs as director of the Chinese Communist Party’s Central Foreign Affairs Commission.

China is about to enter the fourth phase in its historic evolution as a global power. The first phase began in 1949 when the People’s Republic of China (PRC) was founded by Mao Zedong after the nationalists led by Chiang Kai-shek, defeated in the country’s civil war, fled to Taiwan. During the cultural revolution in the 1960s, several million Chinese died through famine and state-sponsored violence. Gifted a seat in the United Nations Security Council (UNSC) following the Second World War, China established formal diplomatic relations with the United States only in 1979, three years after Mao’s death.

The second phase in China’s rise began in 1979 under the diminutive, soft-spoken Deng Xiaoping. Deng knew that the destructive Mao era had done little to advance China’s cause, economically or geopolitically. In 1979 China’s GDP was a mere $178 billion, barely ahead of India’s GDP of $154 billion. At $2.63 trillion, US GDP in 1979 was 15 times China’s GDP. 

As economic reforms took off in China in 1979, Deng prescribed his famous “hide and bide” policy. The US, immersed in defeating the Soviet invasion of Afghanistan, coping with the 1979 Iranian revolution and distracted by the 1980-88 Iraq-Iran war, took its eye off the ball.

China began to steal advanced US technology under Washington’s nose. By the 1990s, China’s GDP had started to rise but it was in the 2000s that the real surge took place. By 2011, China’s GDP had spurted to $7.55 trillion, nearly half of America’s $15.60 trillion. Washington finally woke up to the threat China posed, marking the beginning of the US-China contest for future global supremacy.

The third phase in China’s evolution, which would transform the nature of the relationship between the West and China, began in December 2012 with the ascent of Xi Jinping as president of the PRC and general secretary of the CCP. In the decade since he took power, China’s GDP has more than doubled to $17.30 trillion, within striking distance of current US GDP of $23.60 trillion.

During the ongoing third phase in China’s rise as a global power, Xi has adopted an aggressive military posture. He has made reunification of Taiwan with the PRC a cornerstone of his legacy. Chinese-staffed “police stations” in several countries are part of Xi’s objective to be the world’s leading superpower, supplanting the US by 2049, the centenary of the PRC’s founding.   The police stations are basically Chinese centres spying on Chinese dissidents abroad. Many have now been closed down after an international outcry.

The Mao phase was cathartic. The Deng phase was reformist. The Xi phase will come to be known in history as subversive. It has damaged China’s international reputation: Beijing has broken global treaties, ignored international laws and militarised islands in the South China Sea and the wider Indo-Pacific.

China now stands at the cusp of the fourth phase in its evolution. This phase will unfold gradually as China’s demographic decline accelerates. Analysts have begun to recognize that China may become old before it becomes rich.

Peter Gartcher pointed out in The Sydney Morning Herald: “A country’s fertility rate falls as it grows richer. It’s a mark of social success as women are better educated and have more options and fewer children. But in China’s case, it’s quite abnormal. Other countries have become rich first and then gone into population decline. China is in the process of becoming the first country to get old before it gets rich. The implications are profound. China has invested much of its national status and political standing in the fact that it’s the world’s most populous country. But it’s now on track to be overtaken by India. China’s accelerated ageing will restrain its economic growth.”

Bloomberg’s Dr. Plamen Dimitrov adds a grim reminder: “The average age of the Chinese is 38.5 years. In the 2050s it will be 51 years, and in the 2070s it will reach 57 years and stay at this level. In 2022 only 10 per cent of China's residents were over 60 years of age. By the middle of the century this share will reach a third of the population. The big question is where will the money for the pensions of the hundreds of millions of elderly Chinese come from?”

Xi knows that the demographic window is closing on China. It will slam shut in less than five years, ending the third phase in China’s evolution and heralding the fourth, greying, phase.

For Indian policymakers, China’s fourth phase presents an opportunity to remake the balance of power in the region and globally. India’s population will officially overtake China’s in April 2023. More importantly, India’s demography will remain robust well up to 2050s.

As China slips into its fourth evolutionary phase of slow decline, India must ensure it does not fritter away its own demographic advantage over the next two crucial decades.