Contents
Introduction
China In 2040
China and AI
Concluding Remarks
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.
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.
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?
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?
China And AI
We saw an incredible run-up in AI stocks such as NVDA 0.00%↑ and AMD 0.00%↑ over the last year. Bubbles eventually pop, but with the Federal Reserve starting its interest rate-cutting cycle, will that provide a supporting wind to AI stocks?
There is more to the world than the stock market. Outside of the stock market, what impact will AI have on the world?
It will have an impact, but when and to what extent are the key questions? My workplace recently installed AI cameras to scan for product gaps in the store. However, a person still has to then fill that gap. AI will boost productivity and efficiency if utilized in a way that isn’t a waste of resources. But for now, this will act as a supplement to human productivity. We aren’t yet fully embroiled in the age of robotics when AI can truly change the world, the labour market, and productivity. When a robot can fill the gap on the shelf, we can then discuss drastic shifts in the labour market.
As for China’s AI development, their AI 2030 plan can tell us their aims. China realised the importance of AI in 2016 when DeepMind won a game of Go against the human world champion. A year later, the AI 2030 plan told how China will leverage four areas: Data generation, the pursuit of perfect competition amongst startups, a government that will subsidise infrastructure and supportive conditions, and a society that seeks riches and success.
It’s not all rainbows, as China also states they lack AI talent, likely contributed by an ageing population, a lack of knowledge, or few niches within AI to pursue. The key areas of potential development are medical imaging, audio intelligence, smart vehicles, language translation, service robots, unmanned aerial vehicles, and image recognition. Some of this will come years before others. Medical imagining and image recognition are innovations of today, unmanned aerial vehicles and service robots aren’t yet.
Looking forward, China will experience a population decline. Dependency ratios will rise, hence why China wishes to increase its domestic consumption. To fuel economic growth that does indeed have some downward pressure. China’s Made In 2025 and The China Standards 2035 Plan details China’s plans for incredible innovation. If capital is spent productively, China can continue to develop economically and become a leader in multiple technological fields. AI can alleviate some of these working population decline worries in the long term, and China’s energy experiments will provide more energy, and hence more consumption. The true impact on China will be seen over time and will be a function of their ability to innovate and move to limit the impact of the dependency ratio. When robots can fill gaps on shelves, expect China to be the first one in line to implement such strategies. Whether it can limit the impacts of demographics is a story that will be told in decades to come.
There are also dangers associated with AI in general. Will the pursuit of innovation and survival start an AI arms race, or is one already underway?
Concluding Remarks
One day, do you believe will we realise that China is positioning itself as a nation that we simply can’t live without? Otherwise any nation not interacting with China slips behind technologically?
Or, is China providing an opportunity for those less fortunate? Is it providing them a chance at a better future?
Perhaps, it could well be both. There is certainly evidence of both. That’s geopolitical competition. We’re currently in a period of competition, but we have found ourselves closer to conflict previously. We have to continue to balance this and remain in competitive mode, not conflict mode.
If we look at the technological progress made in the last five decades, we’ve reached a level of exponential growth. Any predictions for China in 2079 would occur in an entirely different world with 55 years of further innovation. Of course, predicting is a difficult game, and whenever anybody says “This time is different”, it’s correct to take their claims with a pinch of salt. Innovation we can only scarcely imagine today, and China’s development trajectory can unfold as one of countless iterations that we will truly see unfold in the future. Hence, I’d recommend being cautious in our assumptions. The ultimate question in my eyes isn’t what China becomes, but what kind of world we collectively pursue.
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Agreed that the sentiment of China facing societal collapse anytime soon is greatly exagerrated. That being said, the population decline will greatly affect China taking America's spot anytime soon in my opinion. Besides, China isn't the only country that may be banking on AI to boost productivity - many western Nations are also struggling to have enough babies to replace workers.