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When China recently announced that its population fell last year for the first time since 1961, share prices for companies that make diapers, incubators and milk formula tumbled. Stocks in a Hong Kong-listed fertility company also took a knock.
The official statistics merely confirmed what many observers had long expected: China had 1.41 billion people at the end of last year, 850,000 fewer than the end of 2021, according to the National Bureau of Statistics. The drop came despite a push by Beijing to persuade families to have more children. The decades-old one-child policy was scrapped in 2016 and replaced with a two-child limit; the cap was raised to three in 2021.
The tumble in diaper stocks overshadowed another potential demographic milestone that was reported last week: India may have already surpassed China as the world’s most-populous nation.
The South Asian nation’s population stood at 1.417 billion at the end of 2022, according to estimates from the World Population Review, an independent organization focused on census and demographics. That’s a little over 5 million more than the 1.412 billion reported by China.
On paper, the crossover fits an evergreen narrative that India’s youthful population will position the nation’s economy as a credible rival to China, whose young workforce has lured foreign investment for decades. Half of India’s population is under the age of 30. China’s birth rate, the number of newborns per 1,000 people, declined to 6.77 last year, the lowest level since at least 1978.
All of which suggests India is on the way to claiming the global growth torch from China. “It means that China’s potential growth is on the way down, and India’s on the way up,” says Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis SA.
For China, a falling population is undoubtedly a negative as the cost of caring for the aged grows, consumer spending hits a ceiling, and workers become more expensive.
Yet Garcia-Herrero reckons a larger population alone won’t be enough for India to pull ahead of China. India will need to attract much more foreign investment to boost productivity, for example.
Other economists say the education and skill set of any workforce is crucial, rather than the total size. The cost of doing business and quality of infrastructure are other critical factors that India needs to put in place.
“Otherwise it could be a demographic disaster with high youth unemployment and high inflation,” says Rob Subbaraman, head of global markets research at Nomura Holdings Inc. “India needs to seize the opportunity.” That means, according to one estimate, that India needs to create at least 140 million jobs in the decade to 2030.
China’s history serves as a reminder that a large population isn’t everything. “China had high population growth in the 1950s-1970s, but that was not converted to economic success until Deng Xiaoping pushed through economic reform and opening,” says Dong Tao, vice chairman for Greater China at Credit Suisse Private Banking Asia Pacific and a veteran analyst of China’s economy. “Those market friendly policies and an infrastructure boom converted the labor factor into success of the Chinese economy, not just the population.”
Is India Benefiting From China’s Population Bust?
More investment is needed to reap rewards from growth.
www.bloomberg.com
