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China’s threat from within

May 31, 2021

As much as China worries about the U.S. trying to hinder its rise as an economic power, a potentially bigger threat lies within its own borders: a shrinking birth rate.

A census released this month showed the number of births in China last year fell to the lowest in six decades even after President Xi Jinping ended the one-child policy in 2015 and allowed each couple to have two. Based on those numbers, Bloomberg Economics projected China's population would peak in 2025 — much earlier than officials had expected.

Today the Politburo loosened the restrictions further, allowing three children per household and increasing the retirement age in the world's most populous country, where about a quarter of people will be 60 or older by 2030.

While that move alone is unlikely to arrest the slide, given the rising costs of having a child, the question now is whether Xi's government can offset the decline with investments in productivity gains and increased migration from rural to urban areas.

Countries facing similar problems haven't fared well. Japan, which was poised to overtake the U.S. economy in the 1980s, saw those aspirations evaporate thanks to a shrinking working-age population and rising debt levels.

Chinese economists have proposed spending more on pensions, healthcare and education to counter disinflationary trends as older people earn and spend less. Yet that will also put pressure on China's budget, potentially increasing debt levels even further.

Whereas the U.S. and Europe have offset slowing birthrates with immigrants, China attracts much fewer foreigners — not least because of its authoritarian political system.

If China is going to reach the next stage as a world power, it will need the help of every last one of its 1.4 billion people. — Dan Ten Kate 

A child plays in a Shanghai park on April 10.

Photographer: Qilai Shen/Bloomberg

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Global Headlines

Israel shift | Benjamin Netanyahu's opponents are edging closer to ousting him after erstwhile ally Naftali Bennett, a pro-settlement security hawk, agreed to join an alternative government. Former Finance Minister Yair Lapid has until Wednesday night to present a formal deal for the coalition he's trying to cobble together of nationalists, centrists and leftists, secular and religious, Arab and Jew in the most unlikely alliance in the annals of Israeli politics.

Final round? | World powers resumed talks in Vienna to reach an agreement between Iran and the U.S. over reviving the 2015 nuclear deal. Russia's main envoy to the discussions said in a tweet there was an understanding among the countries involved that "the current round should be final."

Losing momentum | After witnessing a surge in support in recent months ahead of Germany's federal election, the Greens have slid back into second place behind Angela Merkel's Christian Democratic-led bloc. The last three opinion polls show backing for the chancellor's party rising as the vaccination rate climbs and lockdowns start to ease. Merkel isn't running in the Sept. 26 election.

  • A mostly wooden office building for German lawmakers under construction in Berlin is designed to capture carbon dioxide, symbolizing the central role of climate protection in this year's election, Iain Rogers writes.

If all goes as planned, one of the world's poorest countries will be transformed by Africa's biggest-ever private investment splurge, but there's a problem: attacks by Islamist insurgents.

Managing mistrust | Hong Kong is increasingly leaning on local businesses and institutions to persuade people to get vaccinated, as the government struggles to overcome an atmosphere of mistrust following widespread anti-China protests in 2019. Companies, restaurants and colleges have started offering cash payouts, extra time off, and even the chance to win a $1.4 million apartment.

Digging in | Turkish President Recep Tayyip Erdogan said construction of a $15 billion canal linking the Black Sea with the Sea of Marmara as an alternative to Istanbul's crowded Bosporus strait will begin at the end of June. Erdogan is betting the 45-kilometer (28-mile) Canal Istanbul, strongly opposed by the city's mayor, will create thousands of jobs and help reverse a slide in popularity ahead of 2023 elections.

What to Watch This Week

  • President Joe Biden said the U.S. will stand up for human rights and pledged to raise the matter with Russian President Vladimir Putin at their June 16 summit.
  • West African leaders suspended Mali from the regional bloc after military officers staged the nation's second coup in nine months.
  • Peru's presidential race is tightening a week before the runoff between leftist frontrunner Pedro Castillo and Keiko Fujimori, according to two opinion polls.
  • A Texas voting-rights bill that Biden criticized failed to pass late last night as Democrats who labeled it an attempt at suppression left the chambers before the vote.
  • Colombian President Ivan Duque deployed more troops to the city of Cali and the surrounding region after violent clashes that have killed at least 14 people since Friday.

Thanks to the more than 50 people who answered our Friday quiz question and congratulations to Stephen Cardone, who was the first to name Cuba as the nation gambling that it can solve a worsening Covid-19 crisis itself with vaccines made by local labs.

And finally ... Since Carlos Ghosn's dramatic escape to Lebanon a year and a half ago to avoid trial in Japan, his main legal risks have shifted to France, where the former auto executive is accused of siphoning Renault funds to pay for a yacht and his wife's birthday party at the Palace of Versailles. Starting today, French investigators are due to interrogate the former chairman of Renault, Nissan and Mitsubishi Motors in Beirut.

Ghosn.

Photographer: Hasan Shaaban/Bloomberg
 

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