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What China's population woes mean for the rest of the world

China released its censusreport on Tuesday, showing that the number of births in the country last year dropped 18% from 2019. And China isn't alone — populations have been stagnating globally for decades, including in the U.S.

Why it matters: China has long relied on its large population — the biggest in the world — as a core engine for economic growth. The way that it, and officials across the globe, deal with changing demographics will lead to shifts in the economy and geopolitics.

State of play: China's falling birth rate is the direct effect of its 30-year one-child policy.

  • The country is now reversing course aggressively, with officials calling for incentives to encourage births.
  • In the U.S., the rising cost of healthcare, education and housing, coupled with a lack of government and corporate support for families, make it difficult to reverse the trend.

What they're saying: Low birth rates impact labor supply and consumer demands, can reduce entrepreneurship and innovation and lead to monetary policy changes, according to demographer Lyman Stone.

  • Older people consume more services, causing economies like the U.S. to shift away from manufacturing, he says.
  • When younger populations shrink, incumbent companies may face less competition from new entrepreneurs. 
  • Older populations also have higher savings and less desire for new investments, reducing interest rates.

Case in point: Greece, which has one of the fastest-aging populations in the world, dipped into negative interest rates in 2019.

By the numbers: China reported 12 million births in 2020, compared with 14.7 million in 2019. Its total population now stands at 1.41 billion.

  • People 60 and older make up 18.7% of the population, up from 13.3% in 2010.
  • The working-age population (15-59) is now 63.4% of the total, down from 70% in 2010.
  • The country has already had to boost its pension pools, and officials are slowly increasing the retirement age to limit the impact on its workforce.

What to watch: Immigration debates will heat up as economies weigh the impact of moving workers across borders to increase labor forces.

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