Data released recently by the Chinese government shows its population has begun to shrink and that has some economists worried about the global economy.
China has powered the world’s economy for decades with cheap labor and billions of products.
However, in recent years, many U.S. companies have moved operations out of Asia and to Mexico in a process called “near-shoring,” as promoted in the U.S.-Mexico-Canada Agreement.
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A secondary concern is for U.S. businesses that operate in China and rely on it for much of their revenues.
Q: Should China’s shrinking population be an economic cause for alarm in the U.S.?
Norm Miller, University of San Diego
NO: U.S. consumers’ insatiable appetites for cheap goods will be satisfied via world production shifting from China to countries like Vietnam, Cambodia and Mexico. Population declines in China, Russia and Japan will financially stress their pensions, and slow down their economies. But, globally, the world’s population and global GDP will not be declining. A decline in our U.S. population would be of much greater concern, again in part, because of a worker-to-retiree Social Security system.
Jamie Moraga, Franklin Revere
NO: It’s something to watch and monitor but not be alarmed by at this time. We are a global economy so the U.S. will feel the effects of China’s shrinking population. To mitigate any effects, the U.S. should continue returning manufacturing capabilities to the U.S. as relying on countries like China can lead to supply chain issues, trade and investment disruptions, and higher manufacturing costs. Manufacturing used to be one of America’s strengths and now it’s more of a weakness that is concerning for our national security and economic stability.
David Ely, San Diego State University
NO: This is a cause for concern, but not alarm. China’s shrinking and aging population will result in a smaller labor force so economic growth will be increasingly dependent on productivity advances. China’s pace of growth will slow, but it will remain a major economy. It will continue to help drive global growth. The degree to which other economies are impacted will depend on China’s success in managing these transitions and addressing trade conflicts.
Ray Major, SANDAG
NO: The U.S. should be cognizant of the changing demographics in China, but we should also keep in mind that our population is growing older. The economic impacts of an aging global population will mean U.S. businesses will need to adjust to less and more costly labor and rely more on capital and technology solutions. Now would be a good time to consider strengthening our relationship with countries like Mexico and diversifying our supply chain dependencies.
Caroline Freund, UC San Diego School of Global Policy and Strategy
NO: China’s population is shrinking gradually, so the effect on global economic activity in any given year will be small. Slower growth in China from a diminished workforce can even be good for the U.S. It makes it easier for the U.S. to remain the world’s largest economy, which will ease geopolitical tensions. Fewer people in the world also puts less pressure on global resources, reducing pricing pressures and limiting environmental damage.
Haney Hong, San Diego County Taxpayers Assoc.
YES: But don’t just take my word or my fellow panelists’ words on this. Plenty of talking heads and scholars talk about how a number of trends, including population growth, make this decade one that is very dangerous and a potential tinderbox for war between our two nations. Just ask the Google gods about a guy named Andrew Erickson (an old prof of mine) and look at his argument about the decade of maximum danger.
Kelly Cunningham, San Diego Institute for Economic Research
NO: While a considerable problem for China, there is little reason for the U.S. and other nations to be overly concerned. Centrally planned economies inevitably result in malfunctioning inefficiencies sapping out vitality. Many other nations’ labor forces are more than eager to take up the slack of production, while greater efficiencies from enhanced technologies and automation already make mass labor numbers less critical. Competing forces will lead to significant economic advancements resulting in much improved capacities.
Lynn Reaser, economist
YES: China’s one-child policy already means that the labor force will shrink in the next few years, a trend that will only worsen. This will be a problem for the U.S. both in terms of a source of cheap manufactured goods and a market for U.S. products. India and Mexico and other nations lack the infrastructure or political stability that drove imports from China to $500 billion last year.
Phil Blair, Manpower
NO: The slow shrinking of the China population will have minimal, if any, effect on the U.S. economy. The population drop will take generations to have a meaningful effect. With a population of over a billion people, there will always be plenty of cheap labor.
Gary London, London Moeder Advisors
NO: This is China’s problem and doesn’t have to be ours. Demographic changes are more of a slow drip, with predictable consequences. The U.S. response is to encourage firms to establish manufacturing elsewhere on the globe. Near-shoring is my preference. The lack of economic security in Central America impacts our immigration levels. Seed manufacturing plants there. Further automating manufacturing is also key, particularly the application of AI systems, replacing cheap labor with machines.
Alan Gin, University of San Diego
YES: China’s decreasing population will cause wages to increase, which will increase inflation in the U.S. The importing of low-cost items from China has helped moderate inflation over the last few decades. The Chinese market may also be affected, but a large part of that has not been tapped yet. China’s population decrease will not be unique, as more than half of all countries have a fertility rate below the replacement rate, including the U.S., almost all of western Europe, and many countries in Asia.
Bob Rauch, R.A. Rauch & Associates
NO: China is less likely to be a threat to overtake the U.S. in economic power due to its aging population and continued micro-management of the private sector by its government. While U.S. debt to GDP is way too high, China’s is three times as high at 295 percent of GDP. The Chinese Communist Party does not understand capitalism as they are still socialists at heart. Their dwindling population will be their problem, not ours.
Kirti Gupta, Qualcomm
NO: Not yet. Beyond potentially shrinking markets, the working-age population is declining in many advanced economies. This is a demographic trend long in the making, causing expected labor shortages in many economic sectors. Many economists estimate that the global GDP growth in coming decades is going to decline relative to 2000-2019 levels due to this trend — unless — technological advances improve labor productivity and save the day. It is too early to be alarmed.
James Hamilton, UC San Diego
YES: This will bring a slowdown in China’s economic growth that coincides with Xi Jinping’s ambitions for growing world dominance. That’s a potentially dangerous combination. Authoritarian rulers often become more aggressive and reckless in military decisions to compensate for economic weakness at home. Dealing with the current regimes in China, Russia and Iran calls for great discernment and wisdom by the leaders of the United States and western democracies.
Austin Neudecker, Weave Growth
NO: China’s one-child policy has caused a rapidly aging population, sexual imbalance, and a growing middle class less willing to perform manual labor. The long-term implications will increase the price of goods manufactured in China, pushing low-skilled jobs to other countries. But alarm seems harsh. Ultimately, we must grapple with the reality that countries cannot always grow out of economic problems (e.g. pensions and health systems) and embark on new models.
Chris Van Gorder, Scripps Health
NO: In one way, this might be an opportunity rather than a threat. Moving the manufacturing of products to Mexico and countries in Central and South America could be an opportunity to benefit their economies. However, there is the concern that potential reduced demand in China for U.S. products and services may impact us, as China is America’s third largest export partner, behind Canada and Mexico.
Have an idea for an EconoMeter question? Email me at phillip.molnar@sduniontribune.com. Follow me on Twitter: @PhillipMolnar
