China, Demographics, and AI

Can China's Innovation Outpace Demographic Decline?

Contents

1. Introduction

2. China In 2040

3. China and AI

4. Concluding Remarks

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Bitesize Edition

• Peter Zeihan is one of the most well-known geopolitical analysts on the planet, and of what he states, I agree with him more than I disagree. He does, however, have a tendency to overexaggerate. One such area of overexaggeration is regarding China’s demography. Zeihan has stated China will experience a societal collapse within the next decade due to demographic decline. The only issue is that Zeihan has been stating this for over a decade, and China still exists today.

• This isn’t to understate China’s demographic problems, however. By the turn of the next century, China’s population by some predictions could be halved. I question what impact artificial intelligence could have on delaying or limiting the impact of demographic decline in China, if any. Technological innovation since the Industrial Revolution has reached exponential growth rates. It’s almost unimaginable where we could be by 2100. Let’s dive in.

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Introduction

Last week, I discussed China and how we perceive its rapid geopolitical and technological rise. Many see China as weaponising supply chains to undermine domestic industries in other countries; take steel in the United States, for example. Alternatively, China could be interpreted as developing the underdeveloped world through the cheap manufactured goods it exports. It comes down to how we perceive China.

The Chinese Power Play: Development or Domination?

Today, I’ll discuss what has the potential to be the next global sea change, that being AI. China does also have battles to tackle, one being population decline. How can we view the relationship between artificial intelligence and demographics in China’s unique case?

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China In 2040

One of Peter Zeihan’s biggest arguments for the continued supremacy of the United States, and the eventual decline of Chinese society within a decade is the population decline in China.

Let’s look at the data. China’s population started to decline in 2022 after decades of low population growth crossed the zero line and started to retreat. Other countries find themselves in a period of low population growth and low birth rates, especially due to women prioritising work and careers, having children later and having fewer children when they do have children. Gone are the days when more children were needed for labour on the farm to survive. Hence, this trend is occurring more prevalently in the developed world.

One country in one of the best positions in the developed world is the United States. They have a large landmass, and immigration can continue to see their population grow. China, however, and its One Child Policy has contributed to a distorted population pyramid. So much so, that there is a gender imbalance in China, as well as an age imbalance. Migration also doesn’t seem like it will give China any reprieve.

China is now attempting to encourage births through a Two-Child Policy, as are other developed countries. The policy has led to 5.4 million extra births, but is it too little too late?

Ageing populations can strain pensions, and healthcare, and contribute to a smaller working population, hence lowering economic growth. This can be seen through dependency ratios, which measure the number of dependent citizens in a country (children and elderly) who aren’t working relative to the working population. In China, this is especially prevalent, with often one child due to the One Child Policy having to care for two parents and four grandparents. By 2079, the dependency ratio is predicted to be 101.1.

This can also affect politics in some countries. The elderly population are, in a stereotypical view, set in their ways. Hence political changes to represent this changing world could be more difficult to come by.

Migration could be a solution, but as is seen in Germany, and the UK with the recent riots, this creates tensions.

There is a lot to think about and reconsider when considering demographics and technological development. Systems can become lumbered with inefficiency and inequality. It’s at these times when innovation and drastic change are necessary.

For China, they are set for population decline. As for workforce decline, it is expected to be 0.4% over the next decade.

Is a decline of 0.4% expected to be the trigger for the societal collapse within the next decade as Zeihan predicts? Unlikely. Take Easter Island, for example. In the 1600s, deforestation saw them use up their necessities. When survival is threatened, warfare erupts. This contributed to the destruction of social and political structures, and population collapse ensured. This was a much larger population decline than 0.4%. Are necessities threatened so much that China will collapse from the inside? With their ample reserves, large market share in key industries, and technological innovation, I’d argue not.

However, if we think in multiples of decades, there is an issue here. A dependency ratio of over 100% and a population predicted by some to decline by almost half do sound more likely to incite a potential level of societal collapse. But, what of the technological wave currently sweeping our world? What of AI?