EAST ASIA IS SHRINKING

In 2022, while the world’s population surpassed eight billion, China’s population shrank for the first time in over half a century. And in April 2023, India overtook China to become the world’s most populous country. But the 850,000 people China lost last year are just the beginning of what will become an increasingly steep population decline. 

China is only the most recent East Asian country with a declining population. South Korea started shrinking in 2020 and Japan has been in decline for over a decade now. For a country’s population to remain stable, a birth rate of 2.1 children per woman is required. China’s fertility rate is now at 1.16, while in Japan it is at 1.26. South Korea recently hit a world-record low of 0.78, meaning that it could lose close to two-thirds of its population within another generation. 

It is normal for developing countries to see a significant drop in birth rates over time. Low child mortality rates, solid job opportunities for both parents and reliable retirement prospects all help to reduce birth rates to around replacement level. This process has happened across developed nations and even in some still-developing countries that have achieved low child mortality rates, such as India, Bangladesh and Indonesia, where birth rates have stabilized around replacement level. In most Western countries, rates have dropped well below that, but migration tends to make up for this. The U.S. and the European Union currently have fertility rates of 1.7 and 1.5, respectively, but both continue to grow.

East Asian nations are different. Not only do they have negligible immigration, but their birth rates are abysmal. Furthermore, the continuous decline in birth rates over the past half century led to increasingly old societies. This ongoing trend is already leading to significant demographic changes in China, Japan and South Korea, with long-term implications for the region and the global economy as a whole.

MANY REASONS TO HAVE FEWER CHILDREN

The birth rate of Japan—East Asia’s first fully developed economy—had already dropped to around two children per woman during the 1960s. At that time, the average woman born in China or South Korea could expect to have six children, with the result being that both countries’ population doubled by the end of the century. 

For much of the 20th century, high birth rates were widely seen as a major reason underlying impoverished countries’ struggles to develop. This led to government-backed campaigns across many developing countries to dissuade and even prohibit people from having children. In South Korea, the government implemented wide-ranging birth control policies that utilized tactics of mass mobilization and financial incentives for both women and men to undergo birth control treatments, which were remarkably successful. By the early 1980s, fertility rates dropped well below replacement levels.

In China, anti-natalist policies were much more heavy-handed. The one-child policy, which is often credited with the country’s reduction in birth rates, tasked local government officials with enforcing a one-child limit, mostly by targeting women. The result was forced sterilizations, involuntary abortions, wide-spread infanticide and state-sponsored forced adoption schemes, in which infants were abducted and given up for adoption overseas. 

However, China’s birth rate had been shrinking rapidly for a decade prior to the one-child policy’s introduction in 1979, at which time the country’s fertility rate was already close to replacement levels. The policy ended up worsening the demographic situation and caused a notable gender imbalance, as many parents preferred having a boy as their only child. Nonetheless, it persisted until its revocation in 2016. The Chinese government now pursues a three-child policy, but birth rates across East Asia continue to decline. There are several reasons for this. First are the potential mothers. 

South Korea’s birth rates are as abysmal as its records on gender equality. South Korea remains a highly patriarchal society, with many men feeling that hiring quotas favoring women are discriminatory and where anti-feminist movements are gaining in popularity. Anti-feminist sentiment also helped elect the current President Yoon Suk Yeol, who stated that sexism was “a thing of the past” and later followed through with his election promise to abolish the Ministry of Gender Equality. According to the World Economic Forum’s Global Gender Gap Index, South Korea still only ranks 99th out of 146 countries. China and Japan rank at 102nd and 116th, respectively. 

South Korea has the highest gender pay gap among OECD countries. Women there can expect to earn a third less than their male peers. Career growth also remains an uphill battle for South Korean women. The country is last in The Economist’s Glass Ceiling Index, which measures women’s influence and role in the workplace across 29 developed countries. Second-last is Japan, where having children remains a career-ending decision for most women. Both countries are at the bottom of the index in terms of pay gap and the share of women working in managerial positions. The situation in China, which is not on the list, is no better.

In China, which has a highly competitive job market, long office hours are the norm. For those hours, women can expect significantly lower wages than their male coworkers. Women often have to fear for their job if they admit to considering having children. 

Even when parents across East Asia have made the decision to have children, they tend to stop at one, due to the challenges parents face, starting with cost. When adjusted for per capita income, South Korea is the world’s most expensive place to raise a child, closely followed by China. Japan comes in third place.

Then there is schooling, which is not only expensive, but often a massive strain on both children and parents. Education is highly competitive. Children are expected to study extremely hard from early on in life and parents are expected to help them obtain good grades.

Pressure on the family rises to a climax during high school years, in the run-up to the final university entrance exam, which will determine each pupil’s eligibility to enter elite universities and, often, their entire future. South Korean children sleep an average of six hours during high school years, at a time when children that age require eight to ten hours for healthy development. Chinese and Japanese students are similarly pressured.

High school students study day and night, including on holidays for the final exams—called Suneung in South Korea, Gaokao in China and Senta Shiken in Japan. Parents often take time off work to help prepare for the exam, which will decide over their child’s future. Paying for additional tutoring is crucial, for those who can afford it. 

All this focus on examination goes back to Imperial China’s millennia-old tradition of meritocracy through grand exams. This means, in theory, that anyone can become successful by studying hard and achieving outstanding test scores. In reality, however, students with wealthy parents who can afford to hire the best tutors and send their children to the best cram schools have far greater chances of getting into elite universities.

Extreme stress and depression are common among East Asian high school students. The potential of future wealth and a successful career depends on exam results. Certain professions are only available to the most proficient test takers. Because of this, even those who make it into sought-after professions often end up unhappy, working in careers with long hours for which they have little passion but were pushed into based on their standardized test scores.

Under such circumstances, many prospective parents avoid having children. Life can be tough enough for the childless, with sky-high property prices, long working hours, few vacation days and women having to work extra hard to prove their worth.

STRUGGLING TO TURN THE TREND AROUND

In recent years, Beijing, Tokyo and Seoul all introduced a series of pro-natalist policies, but birth rates continue to decline. China has introduced improved maternity leave and financial incentives, while reducing access to abortions. The South Korean government continues to increase incentives for potential parents, including generous monthly cash payments that are already among the highest in the world. 

Japanese Prime Minister Fumio Kishida has vowed to create a “children-first society.” To this end, Kishida recently announced his country’s most ambitious spending plan yet to raise birth rates. However, Japan has shut over 400 schools annually for the past two decades due to a lack of students and last year a record-low of under 800,000 births was recorded. And all this comes despite Japan already having some of the strongest childcare benefits globally, including significant parental leave and housing subsidies. So far, childcare benefits did not have a significant impact on either country’s birth rate.

One obvious solution to a shrinking population is immigration. It is the reason why most Western countries continue to grow despite low birth rates. However, East Asian countries have very few foreigners to begin with. Only 3% of South Korean residents are foreign-born. In Japan it is 2% and in China a mere 0.1%. In migration-friendly countries such as the US, Germany and Australia, foreigners constitute 15%, 19% and 30% of the population, respectively. 

There is currently little political will to increase inbound migration in either country. Foreigners in all three countries are generally treated as temporary residents and face many restrictions to participating in society, including few-to-no prospects of permanent status, not to mention citizenship. South Korean President Yoon recently called for a change in how immigrants are treated and perceived in the country, but no clear solutions were offered. 

Japan, the oldest of East Asian societies, urgently needs foreign workers across sectors. Kishida recently admitted that his country was “on the brink of being unable to maintain social functions.” And yet, many hurdles remain for foreigners, including a lack of diversity in the existing workforce, long working hours and in some professions very high certification requirements. Japan even continues to criminalize asylum seekers. 

But while Japan and South Korea have become more open to discussions of letting more foreigners in, China has become increasingly closed off and lacks pro-immigration policies, except for temporary work visas for certain industry professions. 

The one exception in all three countries is for ethnic descendants of citizens, who can easily obtain work visas and permanent residency. In all three countries, bloodline is the easiest, and often only, way to obtain citizenship.

POPULATION DECLINE IS JUST THE BEGINNING

For now, the demographic situation of China is still stable. The ratio of those beyond the working age compared to the labor force—known as the dependency ratio—is still at a healthy 45%, compared to an OECD average of 55%. South Korea is even better, at 40%. However, both countries are aging rapidly and will steadily approach Japan, which already has a dependency ratio of 71%—the highest in the developed world. The result is a significantly smaller labor force and rapid population decline.

Since its peak in 2008, Japan’s population shrank by 4 million—3% of the total—and the trend is accelerating. Last year alone, the country lost half a million people and by around mid-century, Japan’s population will drop below 100 million. According to U.N. estimates, South Korea’s population of 51 million will drop to 36 million by 2060 and could be as low as 16 million by 2100. 

China’s demographic decline will pick up pace in the 2030s and subsequently accelerate. By 2080, its population will drop below 1 billion and by the end of the century, China will likely have less than 800 million people, which will be half of India’s population. China’s real figure could end up much lower if birth rates decline further. East Asia’s population size will seize to be a guarantor for economic might, while another part of the world will gain in economic significance.

Africa’s population is currently about equal to that of China, but by 2050 it will be double. By 2100 Africa could have a population of 4.3 billion, more than all of Asia combined and five times that of China. Nigeria alone will have 400 million inhabitants by mid-century and replace the US as the world’s third most-populous country. 

This means that within another generation, the geopolitical center of gravity will likely also shift. One in five people on earth are currently East Asian, but by the end of the century it will be less than one in ten. One constant will likely remain: The U.S. can be expected to still be the world’s biggest economy. Even if it were to be briefly dethroned by China in the 2030s, China’s contracting economy would see it fall behind again soon.

As East Asia’s population shrinks, its housing prices, which are currently among the world’s highest, will start to invert and eventually plummet. This will add another economic challenge, as much of personal wealth is tied up in property. In addition, aging populations tend to be less innovative—an issue Japan is already grappling with—which further compounds economic contraction.

This also means changes to security policy. After all, if China would lose half its population, it would have to double its relative defense spending just to maintain its massive military forces. This will be even more of a burden with the increased government spending requirements for an elderly population.

Low birth rates are not a unique problem to East Asia. Currently 124 countries have birth rates below replacement level, including the entire Western hemisphere. Germany, Australia and the UK all have birth rates similar to that of Japan, but unlike Japan, their populations are growing, thanks to immigration. 

However, migration will continue to be an issue for East Asia, rather than a solution. Japan and South Korea are rich countries with highly developed economies and China is home to many promising high-tech industries, including green energy technologies and artificial intelligence. Nonetheless, far more people leave these countries than move in. 

While gradual shifts toward more migration-friendly policies are likely, they will probably not go far enough. All three countries are much more homogenous societies than the U.S. or Europe. Furthermore, the population decline ahead will make an increasing presence of foreign workers an easy populist target to blame for ensuing economic woes.

In the coming years, government spending for childcare benefits will likely continue to increase significantly. However, such policies could end up further worsening gender wage gaps. Introducing state policies for prolonged maternity leave and improving overall benefits for mothers will only increase companies’ existing reluctance to hire and promote women, especially in China, where employers already commonly discriminate against prospective mothers. The Chinese government will also likely try more heavy-handed policies, such as further restricting access to abortions.

The current path of population decline is not set in stone and significant changes to societal structures, gender parity, government policies and immigration could alter the long-term trajectory of population decline. Still, for the foreseeable future, East Asia’s trend of rapid population decline will continue. 

Economic decline, societal tensions, shifting domestic security landscapes and a declining geopolitical footprint for the region are some of the most obvious outcomes. While East Asian governments will be increasingly desperate to turn the demographic trend around, in the end it will be their peoples’ decision whether to have more children. Increasing incentives may no longer be enough, as societal expectations are changing and many young people no longer see having children as life goals.

According to a recent survey, over half of South Koreans in their twenties do not want to have any children. A Japanese survey found roughly the same result for young Japanese. Another Chinese survey found that two-thirds of young women had little to no desire to have children. This new normal among young people can be felt increasingly acute in all three societies.

One telling example is a 2022 video that went viral on Chinese social media. In it, a young Chinese man could be heard refusing to be taken to a COVID-19 quarantine center. A police officer warned him that his actions would affect his family for three generations to come, to which the man responded: “We are the last generation, thank you.”