Population decline could be a good thing for China

China's rapid development in its first 30 years of reform and opening up was aided by globalisation and the free trade policies and transfer of industries from developed capitalist economies that came with it. Flushed with foreign capital and trade, China's centuries-old issue of overpopulation became a population dividend and transformed China into the world's factory overnight. The premise to all of this was integration with the global capitalist system.

In 2022, for the first time since the great famines of the 1960s, China's population shrank, causing considerable panic. China's rapidly ageing population appears to double the ill portent, prompting speculations from some mainstream economists in the West that China's economy will never surpass that of the US. In 2022, the number of deaths in China exceeded the number of births, resulting in a population decline of about 800,000. Earlier than expected, it was announced in January that India would become the world's most populous nation later this year, and that this trend would continue.

China adopted the two-child policy in 2016 and subsequently ended its population control policies to encourage childbearing. However, this has not yielded positive results. In 2021, for every 1,000 people, there were 7.52 babies born in China, less than the 11.06 in the US, 16.42 in India, and 10.08 in the UK. The era of concurrent population decline and ageing is upon China.

However, population decline should actually bring dividends. In 1980, when its population was 980 million, widely considered an unbearable burden, China comprehensively implemented the one-child policy. In fact, when the population hit 800 million in the early 1970s, the Chinese government felt immense pressure. Mao Zedong said then, "We have 800 million people. How can we not fight?" Based on this thinking, while it is a little late for the population to start declining at 1.4 billion, it should still be lauded.

Let us work through this thought experiment: in 2022 and 1978 (the year China's reform and opening up era began) respectively, China's GDP was 121 trillion RMB (US$18 trillion) and 367.9 billion RMB (US$218.5 billion), its population was 1.4118 billion and 956 million, and its per capita GDP was 85,724 RMB (US$12,745) and 385 RMB (US$229).

Assuming productivity remains unchanged since production modes and technologies are rarely retrogressive, and based on China's per capita GDP of 85,724 RMB in 2022, a sharp population decline to the 1978 level would still yield a GDP of 83 trillion RMB (US$12.31 trillion, about half of the US's GDP in 2022), merely retreating to its 2017 GDP. Dividing 83 trillion RMB by 956 million people, the per capita GDP is 86,820 RMB, higher than that of 85,724 RMB in 2022.

This implies that per capita GDP actually increases with the population decline if productivity is maintained. Since productivity usually increases, it is a matter of time before China's economy will surpass that of the US despite a sharp population decline, as long as it maintains a higher economic growth than the US. A reliance on population expansion for economic growth, however, will bring many negative impacts.

Furthermore, a population decline can ease the pressures on the natural environment and resources, reducing the sources of pollution and lowering the need for energy imports, which would allow more effective use of self-produced renewable energy as replacement. There will be less traffic congestion, and housing can be more spacious and less expensive. The pressures of labour and human resource competition in the market will be correspondingly reduced, enabling technological progress to make up for the labour shortage, thus improving productivity. These are all dividends, which are unachievable with capitalist logic. Capitalism, like drugs, is addictive and becomes habitual.

Now, China has prematurely joined the ranks of developed nations that commonly experience population decline. This is attributed to the utter transformation of the human practice of thousands of years by the capitalist mode of production and values, turning from family pursuits to individual quests for pleasure and less burden.

This can be regarded as a deliberate vicious circle of capitalism. We work harder to make more money, so as not to lose out to our neighbours in material consumption. As a result, life's pressure constantly mounts, which leads to a reluctance and inability to bear the responsibilities of procreation and nurturing the next generation.

The fundamental reason for low fertility is the tremendous changes in lifestyle and values that differentiate contemporary Chinese people from their ancestors for thousands of years. Instead of continuing the family bloodline, self-centred pursuit drives behaviour. The traditional logic of "posterity for prosperity" no longer works and close family ties have been upended by the pension system that is centred on the individual.

Consumption-driven economic growth is essentially capitalist, and consumption is determined by income. The ordinary person faces increasingly greater pressure to earn more, and this pressure coexists with capitalism and increases with technological advancements.

However, the complete replacement of human labour by AI will sound the death knell for the capitalist mode of production. Only the nations that are prepared for this eventuality will transition to and flourish in a post-capitalist world ahead of others.

The essence of socialism is to transcend market logic. Let us conduct another thought experiment: society's total demand can be calculated by multiplying the median income by the total population. This amount is always less than the total demand of the market that has the ability to pay. Since capitalist production is based on the latter, a crisis of overproduction results - much production capacity, food and other necessities have to be destroyed and wasted, while large numbers of people suffer from cold and hunger at the same time. A case in point is the current real estate crisis in China, in which many newly constructed buildings are demolished.

China's countermeasures to address the cyclical economic crisis and population decline are no different from those adopted by capitalist countries: reducing production capacity and encouraging births, with the aim to support market demand instead of meeting social needs.

However, encouraging consumption is limited by employment, which is in turn limited by technological progress.

The inherent capitalist logic is that population decline undermines the forces of production because the latter is constrained by the market's capacity, which is in turn dependent on an increase in employment. The market contracts when employment is reduced, leading to the deliberate destruction of production capacity to restore the market balance of supply and demand.

A reduced workforce will also adversely affect the ratio of taxpayers to pensioners, which may lead to bankruptcy and social unrest.

Globally, no nation has succeeded in policies that encourage births, and the structural reasons are due to capitalism. They include an individualistic outlook, consumerist values, career women with higher education in the workforce, work pressures and the heavy burden of child rearing, as well as lifestyle and sociocultural changes caused by urbanisation and commercialisation. Taking in large numbers of immigrants to augment labour supply may cause social conflicts and political turmoil and the welfare state routinely runs into financial and debt problems.

The above standard solutions are capitalist in nature and address the symptoms but not the root causes. Often attributed to Einstein, the saying goes: "Insanity is doing the same thing over and over again and expecting different results." By integrating its economy with the global capitalist system, China has also taken on the fundamental problems of capitalism.

Socialism is meant to overcome these problems so that economic growth does not depend on population expansion and increased input of resources. On the contrary, population decline should bring multiple dividends. It will be more conducive to restoring harmony between man and nature as well as reversing the alienation by capitalism. It will help in the restoration of harmonious human relations from cut-throat competition, finding life's meanings outside monetary exchanges and obtaining a non-commercialised quality of life. Reducing the share of humanity in the biosphere will also boost biodiversity and contribute to sustainable development.

Therefore, socialism in China should deliver solutions that are different from capitalism and turn the crisis of population decline into an opportunity. The Marxist communist ideal is actually very simple, and that is to align the society's production directly with its needs and remove the middle links of market, employment and profit-seeking. This will greatly enhance the utilisation of production capacity instead of reducing it for market profitability while leaving many people impoverished.

The main challenges for socialism are twofold: what could replace market discipline and profits to be the motivation for economic activities? To successfully address these two challenges while preventing the free-rider problem - a common ill of both the welfare state and old socialism, will be the key to humanity's transition to post-capitalism.

The centrally planned economy has proven incapable of addressing these two challenges and lost in the contest with capitalism. China can neither revert to the planned economy nor persist with the capitalist market economy as it will face almost all the problems that currently plague capitalist economies. In other words, blazing new paths is the only way.

Instead of the current centralisation of power, what is needed is decentralisation to unleash institutional innovations and bold experiments at local initiatives. This is because there is no ready answer from any "-isms" or thoughts, including Marxism, Mao Zedong Thought or Xi Jinping Thought. Therefore, removing oneself from the ideology straitjacket is paramount, with extensive experiments that are guided by common human values instead of being directed by theories or dogmas.

The biggest obstacles are habitual thinking and the status-quo interests in the existing institutional arrangements which are products of capitalism that are taken for granted. Fortunately, as China has not been immersed in and afflicted by the ills of liberalism for very long, it will be easier to change course than the established capitalist nations. China also enjoys some edge in "top-level design" and execution in its state capacity. What it lacks is innovative vitality.

For China's socialism to shine as a beacon, a different set of solutions must be proposed to address the myriad of problems brought about by population decline. For instance, it should give up on competing on GDP with other economies, and refocus on human development. And it should focus more on better utilisation of its production capacity instead of on reducing it.

Purposeful reforms should be carried out so as to gain policy autonomy from the constraints of capitalist world economy. Employment must be progressively redefined to transform the nature and meaning of work so as to enable every person of all ages to find a role in society.

The consumerist ideology must be rejected for the "socialist core values" embedded in the socioeconomic systems. Better ways of validation and measurement of value should be explored and workers' rights and interests better protected. The motivations nobler than profit-seeking that are inherent in human nature should be systematically deployed to drive socioeconomic activities, including scientific research and technological advancements, while a fairer and more humane mode of production should be explored.

To facilitate as well as take advantage of population decline, production technologies must be planned, prioritised and systematically developed on the basis of anticipated future population sizes and workforce structures, so that productivity and living standards can continue to rise.

In summary, the population dividend is capitalist in nature but being able to reap the dividends of population decline is the mark of socialism. To achieve the goal of benefiting from the rewards of the population decline is to truly surpass and defeat capitalism.

This article was first published in Lianhe Zaobao as "收割人口下降的红利".

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