• China’s population has reached its peak and is projected to remain above 1.39bn until 2035. After a brief rebound, the number of newborns is expected to return to its previous downward trend owing to a combination of fewer women of reproductive age and declining fertility rates.

• Future population reallocation will mainly be driven more by migration between urban areas, rather than from rural to urban areas, which will result in a gradual slowdown in the urbanisation rate.

• As societal trends shift towards delayed marriage and increased individuality, single-person households are becoming more appealing, benefiting sales of products and services on personal care.

• Economic growth will slow as a result of a smaller workforce. Challenges to fiscal health necessitate a postponement of the retirement age; delaying it to 65 by 2035 could reduce the budget shortfall by about 20%.

EIU has updated its demographic projection for China to 2025; the country’s population will fall from 1.41bn to below 1.39bn by 2035, as a result of fewer newborns and more deaths from an ageing population. Although population shrinkage is occurring more rapidly than anticipated, China is poised to maintain its position as the world’s second-largest population in the foreseeable future, ensuring a substantial market size.

Embracing an ageing society and adjusting to fewer births

A reduced birth rate projection forms the basis for the anticipated decline in the overall population. This is expected to lead to a smaller child and youth demographic, potentially resulting in a decreased customer base for industries such as milk formula, toys, childcare and tutoring. However, it may also lead to higher expenditure per child. We expect an ephemeral increase of new births in 2024 and 2025, following a period of disrupted interest in expanding the family size during the pandemic amid bleak social and economic prospects. Subsequently, the number of newborns is expected to gradually decline in the years to come. 

The government’s pronatalist policies will have a limited effect. Married couples have cited high economic costs as a major reason for having fewer children, based on various market surveys. The latest data also show that the proportion of second and subsequent births has plateaued, suggesting that a relaxation in birth control in 2013 and 2015 has had limited effect. More structurally, China’s youth is delaying marriage and, in some cases, passing up on starting families altogether. The delay of marriages, which strongly correlates with birth rates, will result in fewer babies. 

Low fertility rates and improvements in population longevity, coupled with advancements in public health, contribute to an increasing proportion of the elderly population. We forecast that by 2035, China will have more than 450m people who are aged above 60; or 32.7% of the total population. Those aged 65 and above will comprise 25.1%. Although this suggests a heightened fiscal burden, it will also positively affect the healthcare-sector demand and at‑home spending, particularly with individuals returning home after retirement. This shift may lead to increased expenditure on home appliances, contrasting with traditional in‑person spending. 

“Single” all the way

Demographic trends beyond the headline population will have business implications. The family size is shrinking—particularly as singlehood appeals to populations of all ages. The 2020 population census reveals a steady decline in family size over recent decades, with more than 57% of the population now living in households with two or fewer individuals. Single-person households have more than doubled since 2010. Although this aligns with demographic patterns observed in more developed countries, China possesses unique characteristics. Singlehood in the country not only mirrors the postponement of marriages due to higher education levels, a heightened focus on career development, and an embrace of individuality, but it also reflects a significant migrant population that is unable to bring their families into China. In certain instances, it reflects older generations living independently.

There is a divergence in family trends to which consumer-facing companies can cater. Single-person households are primarily located in Guangdong, followed by Zhejiang and Liaoning. It is noteworthy that Liaoning has about the same number of single-person households as Jiangsu, despite its total population size being much smaller than that of the southern province. The broader north‑eastern region (and Tibet) has the smallest family size in the country, which we attribute to stringent one‑child policies and migration outflows.   

Migration patterns are evolving

Although the flow of population in 2020‑23 may have been severely disrupted by pandemic-related lockdowns, the migration between 2015 and 2020 better reflects the fundamental direction of the migration. Guangdong, Zhejiang, Shanghai and Jiangsu emerged as the most attractive destinations for migrants in China. In contrast, Henan, Hunan, Guizhou and Anhui experienced the largest outflow of people. This occurred despite the significant industrial transfers from coastal to inland regions, suggesting that other factors were at play. One such factor is the proximity to developed metropolitan areas, which acts as a strong pull for migrants. This is particularly evident in the cases of outflow of Hunan and Anhui, which lost population to the Greater Bay Area and Yangtze River Delta. Another contributing factor is the urbanisation rate.

Provinces with a large rural population and relatively lower income level, such as Henan, Anhui and Guizhou, tend to experience a significant outflow of people. This has contributed to a steady population inflow into urban areas. The 2020 census reveals that in 61 cities, the majority of the population still resides in rural areas. This includes cities such as Fuyang with a 58% rural population, Bozhou with 57.5%, and Zhoukou with 57.4%. This similarly applies to less urbanised cities in more urbanised provinces: Zhanjiang, Yunfu and Maoming, all in Guangdong province, have substantial rural populations, and will continue to experience an outflow of their population.

The lifting of pandemic restrictions in 2023 led to a significant rebound in metro passenger traffic in Shanghai, Beijing (China’s capital), Guangzhou and Shenzhen, indicating a resurgence of populations in these largest cities. The employment opportunities in the tertiary sector, which rebounded strongly in the post‑covid era, are disproportionately concentrated in highly urbanised and developed regions. 

Mixed economic implications 

The canonical Solow model asserts that economic growth hinges on productivity, capital accumulation and labour inputs. The negative effect of an adverse demographic landscape will manifest primarily through a shrinking workforce. While Japan has witnessed increased employment, primarily driven by greater female labour-market participation, such a trend is less likely to occur in China in the medium term. China’s female labour-market participation is among one of the world’s highest, at 61% as at 2022—8% higher than Japan—suggesting limited potential for workforce expansion through female participation. 

In response to the economic and fiscal challenge, we expect the government to postpone the retirement age only gradually to avoid cannibalising young hires at a time when youth employment is already at all‑time high, which risks social stability. With limited opportunities for labour force expansion, the government will probably prioritise enhancing human capital within the workforce. It may accelerate the adoption of automation. 

A declining population also affects capital accumulation and productivity. By 2035 China’s dependency ratio is expected to reach 53%, from 46% in 2021. Since the elder population engages in less production but are still consumers, this implies that a larger portion of total output is directed towards consumption, leading to reduced savings and capital accumulation rates. The impact on the total factor productivity is more nuanced.

The fiscal strain as a result of ageing is immediate and concerning. Based on the labour-force participation rate and a target replacement rate of 0.54 in 2021, which measures pension entitlement divided by pre‑retirement earnings, we expect the shortage (defined by pension contributions deducted by expenses) to continue to grow, reaching 11.9% of national labour income by 2035, up from 3.88% in 2020. Our calculations suggest that if the retirement age is raised to 65 by 2035, the pension budget shortfall could be reduced by 20% and received net pension can be increased by 30%, suggesting relief of both government and household burden. Gradually raising the retirement age emerges as one of the few viable options for maintaining long-term fiscal balance, despite potential challenges this may pose to the young labour market during the transition and the burden it may place on ageing individuals to maintain their health condition and productivity. 

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.