China has stopped growing. Did you hear?
It’s a potentially world-changing and markets-disrupting development that while not entirely unexpected to happen sometime, certainly was not expected to be happening yet.
Basically, China’s population is believed to have fallen slightly, as the lingering impact of its famous “one child” policy continues to sap China’s fertility rate, which has fallen to 1.5 babies per female, despite the policy being scrapped years ago. At 25 percent beneath replacement rate, and a government and cultural aversion to immigration, it’s hard to not see this as the beginning of a long-term trend for China’s gigantic population.
This won’t reverse China’s stunning economic growth. Despite its gleaming coastal cities, much the nation is still underdeveloped and far behind living standards common to the advanced world, from its neighbours in South Korea and Japan to the Anglosphere settler nations to the countries of the European Union. China can grow at a clip faster than that possible in advanced nations as it catches up, applying both foreign and domestically-produced technologies and systems that allow it to escape decades of painstaking incremental development that Western nations worked through.
It certainly won’t reverse its growth in geopolitical ambitions or power. Relatively, China is much, much stronger than it was 15 years ago, before the Great Financial Crisis, and much stronger than it was before COVID-19 spread across the planet. Deft authoritarian controls snuffed out the pandemic in China while blundering democratic governments across the world fumbled their responses, giving China’s communist party government both a massive economic edge and a propaganda coup with its own people and for developing nations across the planet. The country has developed an industrial base that can build aircraft carriers, stealth aircraft, spaceships, and support a modern multi-million person military in a region with no equals. That industrial base will keep developing, and its great geopolitical rival – the United States – faces a lingering economic and social after-effect of both the disastrous Trump years and the economic damage wrought by the pandemic. If there ever was an opportunity for China to act boldly, it might be now.
However, the rapid aging of the Chinese population, which greys as not only does the overall population decline but more and more of today’s working population ages and moves into retirement, as fewer and fewer young people move in behind them to power the economy and support the elders, suggests that the biggest impact of the demographic shift will be in its demand for commodities. An aging population consumes different things than a youthful population, and a shrinking population of workers and growing population of care-dependent elders requires different infrastructure, goods and services. That could have a big impact upon what Canada sells to China.
What will that mean? Here are some guesses: 1) Less growth in meat consumption and more growth in health food consumption; 2) Slower growth in bulk agricultural commodity sales; 3) Declines in consumption of capital construction commodities like copper, iron ore and metallurgical coal; 4) A switch from capital-intensive growth and factory production to care home construction and health centres; 5) More automation and robotics throughout China’s manufacturing and agricultural industries as workers become scarce; 6) An even more inwardly-focused nation.
If any of those guesses turn out to be accurate it’ll have a big impact on the exports of many Canadian commodities, including those that Western Canadian farmers produce, such as canola and pork. We’ve been feeding a growing dragon. What will be our relationship with an aging dragon?
Two years ago fellow reporter Robert Arnason and I looked at the possibility of China’s population slowing and reversing growth. We called our Special Report Dangerous Assumptions because we worried that so much of the bullishness about Canadian agriculture’s future arose from projections of an ever-growing China. What happens if that growth stops?
Well, we might be finding out sooner than I imagined.