The End of the Demographic Dividend
China’s remarkable economic ascent over the past four decades was built on a powerful demographic dividend—a vast, youthful labour force that powered its manufacturing-led growth model, according to CEI’s Demographic Report. Yet, as the latest demographic data reveals, that era is decisively ending. By 2025, China’s population is projected to peak at approximately 1.43 billion before entering a period of sustained decline, with profound implications for its economy, social structures, and global role.
One of the most striking findings from the report is the rapid ageing of the population. By 2025, citizens aged 65 and over will account for nearly 15% of the population, a figure that is set to rise to 26% by 2045. This surge is the direct result of China’s one-child policy, which dramatically reduced birth rates from the 1980s onward. In megacities like Shanghai and Beijing, fertility rates have plummeted to as low as 0.5–0.6 births per woman—far below the replacement level of 2.1. The social and economic consequences of this demographic shift are already becoming apparent, from elder care shortages to increasing pressure on public finances.
A Shrinking Labor Force
Compounding this crisis is the decline in the working-age population, which peaked in 2020 at 990 million and is now on a downward trajectory. This contraction threatens to undermine productivity, increase labour costs, and constrain growth just as China seeks to transition towards a high-income, consumption-driven economy. The report highlights a growing divergence between productivity growth and real wage increases—a gap that represents an estimated ¥4.3 trillion in suppressed consumer demand in 2024 alone. Without significant gains in automation or efficiency, China’s potential growth rate could fall sharply.
The Strains of Rapid Urbanization
Urbanisation continues at a breakneck pace, with 90% of China’s population expected to live in cities by the end of the century, up from 37% in 1995. This will place immense strain on infrastructure, public services, and environmental resources. Already, the urban population is set to reach 1.2 billion by 2060—equivalent to the country’s entire population today.
Perhaps the most alarming statistic is the soaring price-to-income ratio in the housing market, particularly in Tier 1 cities. In Beijing, the average property price is 32.5 times the average income—compared to 8.9 in Tokyo and 7.2 in New York. This affordability crisis is exacerbating social inequalities and limiting household consumption, further hampering efforts to rebalance the economy.
Demography is not Destiny
The government has responded with measures to encourage higher birth rates, including the introduction of a three-child policy and financial incentives for families. However, these efforts have so far yielded limited results, as high living costs and cultural shifts continue to discourage larger families.
Demography is not destiny, but it does set the parameters within which economic policy must operate. For China, the coming decades will be defined by its ability to adapt to an older, smaller, and more urban population. How it navigates this transition will determine not only its own economic future but also the stability of the global economy.