Editor’s note: David A. AndelmanCNN contributor, two-time Deadline Club Award winner, is a Knight of the French Legion of Honor, author of “A Red Line in the Sand: Diplomacy, Strategy, and the History of Wars That Could Yet Happen” and blogging at andelman unleashed. Previously, he was a correspondent for The New York Times and CBS News in Europe and Asia. The opinions expressed in this comment are his own. Sight more opinion on CNN.
Asia is hurtling towards a tectonic power shift led by increasingly rapid changes in population growth. The West, especially the United States, must be prepared.
A dramatic demographic shift is underway after China’s population shrank in 2022 for the first time in six decades. Meanwhile, India, with its continued population growth, is expected to overtake China as the world’s most populous country according to UN estimates from April.
The latest statistics show that China is increasingly grappling with its one-child policy, which officially ended in 2016 after more than three decades. The policy introduced a number of challenges; Perhaps the most important is the 4-2-1 problem, in which a working person, by virtue of being an only child, ends up having to support four grandparents and two parents, a huge burden on the workforce. It also puts pressure on China’s government-backed pension system.
This crisis is the result of a policy designed by the Communist Party to curb population growth and promulgated in an open letter on September 25, 1980, that no family could have more than one child. The policy also led to abortions of female fetuses, abandonment, and even infanticide due to preference for sons, and the ratio between men and women eventually began to distort.
Within a decade, the fertility rate had plummeted below 2.1, a rate that supported zero population growth.
By 2016, families were officially allowed to have two children, then three children by 2021, and no fines were imposed on families regardless of size. However, by then it was too late to reverse the catastrophic demographic trend.
Last year, China’s National Bureau of Statistics reported that new births fell for the sixth consecutive year to 9.56 million, while nationwide deaths hit 10.6 million people. New births also mean fewer consumers, eventually a shrinking workforce, a smaller next generation, and fewer Chinese workers to support their children and retired family members. It is a spiral that may be impossible to reverse.
At the same time, the covid-19 pandemic and the government’s strict zero-covid policies also exacerbated the drop in the number of marriages. China’s Official Statistical Yearbook 2022 showed that the number of marriages in China fell to the lowest level on record in 2021, at 7.6 million people.
Hidden in these numbers are some troubling realities for China and for the world economy.
A shrinking Chinese population means lower domestic consumption, which has the potential to seriously affect companies trying to do business there by selling to what will inevitably be a shrinking Chinese domestic market. Consumer brands like Starbucks, Nike and Under Armour, and tech and auto companies like Apple, Intel, Tesla, General Motors and Ford generate a substantial amount of their global revenue from Chinese consumers. Tesla makes half of its electric cars in China. Until 2019, Apple had about half of its assembly lines in China, although these numbers began to drop substantially in subsequent years, reaching 36% last year.
These production figures point to an even more dramatic problem for China, as its spiraling population also means a rapidly dwindling pool of cheap, skilled labor. Western companies are already looking elsewhere, although manufacturing from China could be hard to replicate on the same scale anytime soon.
India, whose population is expected to exceed that of China, is the logical substitute. While China will continue to shrink, India will continue to grow, likely peaking in 2064 at 1.7 billion, up from 1.42 billion today, almost 50% more than China’s projected population at the time. In theory, this would be the nation to go to for cheap and even more educated labor, especially for high-tech industries.
But here is a big problem. The bulk of well-educated tech workers are found in western and southern India, where population growth is less intense.
Places like Uttar Pradesh in the north, with 200 million people, is where the huge increase in population is taking place.
But manufacturing is lagging behind in Uttar Pradesh, which has 17% of India’s population but only 9% of its manufacturing jobs. Furthermore, many of India’s fastest growing regions are barely accessible by modern commercial transport, and the population is marginally educated. India is on a tear to remedy these inequities, but it will take a while.
Prime Minister Narendra Modi’s goal is to turn India into a $5 trillion economy by next year, with Uttar Pradesh a $1 trillion economy by 2027. To reach these goals, he will need a lot of help, much of it from abroad.
Apple has already started moving a portion of its iPhone production from China to India. One in 4 iPhones could be made in India by 2025. Walmart seeks to triple its exports of Indian-made goods to $10 billion by 2027. All of this will put Modi and his country in direct, and potentially toxic, competition with Xi Jinping . and china
Inherent in the advantage of replacing China with India is that the West will replace an oligarchic autocracy with a more or less Western-style democracy as its main economic partner.
Of course, that will leave China increasingly against the wall, defensive and hostile, in the face of a democratic India with a Western leaning. In December, the United States added 36 Chinese companies to a blacklist for trading high-end technologies after tightening rules on selling semiconductor technology to China.
The Biden administration is still making some efforts to heal open wounds with China: Treasury Secretary Janet Yellen met with Chinese Vice Premier Liu He last week. Liu had just made a big pitch at the World Economic Forum in Davos, Switzerland, for more investment in China. But this may be too little, too late.
And there is clearly little interest for the leaders of China and India to mend relations anytime soon. At the Shanghai Cooperation Organization summit in Samarkand, Uzbekistan, in September, there was no bilateral meeting, no publicly recorded smile or even a handshake between Xi and Modi, prompting former Chinese diplomat Shi Jiangtao to write in the South China Morning Post: “The geopolitical divide that is occurring between China and India could not be more evident. … President Xi Jinping and Prime Minister Narendra Modi have not met or spoken since a military standoff began in the disputed Himalayan border region in May 2020.” (However, Xi and Modi did speak briefly at the G20 dinner in Bali in November.)
As India prepares to displace China as the world’s most populous nation, the United States and the West may be forced to choose sides. It is a pressure that must be resisted for as long as possible for the sake of political stability, not to mention economic pragmatism.