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China’s economy faces a time bomb–its slow birth rate

China's President Xi Jinping

The elephant in the room for China, which is currently facing multiple economic challenges, is the slowing birth rate.

As the world closely watches China and the actions the country takes to address economic challenges that have hit the country, the biggest of them all remains the falling birth rate, something the authorities can do little about.

Even as China gave a go ahead to Chinese couples to have three children, rating agency Moody's Investors Service in its report said that the three-child policy to support the declining fertility rate was unlikely to dramatically change its birth rate.

“This is a very basic and serious issue which cannot be resolved by the Chinese authorities and now with the economy slowing down and less jobs available, most couples are likely to be averse to go in for more than one child,” an analyst told India Narrative.

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A growing population would mean slowing consumption. Not just that. The slowing birth rate in China has also led to concerns of labour shortage. News agency ANI quoted a report from Capital Economics which said that China's workforce is expected to shrink by more than 0.5 per cent a year.

“Forget all the other worries about China. The big problem is that the country is going to run out of its most productive workers. Ultimately, this means that growth will start grinding to a near crawl, at best,” Forbes said.

Quoting a report from Frost Investment Advisors titled ‘Cracks in China’s Economy’, Forbes said that some cracks are appearing in the foundation of the Chinese economy.

“There’s been a dearth of baby making in China for decades now and that means there’s a demographic bulge,” it said.

China’s census, released on 11 May, showed that the population grew at its slowest rate during the last decade since the 1950s, to 1.41 billion, fuelling concerns that China would grow old before it gets wealthy.

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According to data there have been 12 million births in 2020, the lowest since 1961. The census said there were 264 million in the 60 and over age group, up 5.44 per cent since 2010 and accounting for 18.70 per cent of the total population.  After the one-child policy, China’s fertility rate fell from 2.75 in 1979 to 1.69 in 2018.