At one point, China was so worried about its rapidly growing population that the Chinese Communist Party implemented notorious family-planning policies. But now its population has peaked, its workforce is aging and the party can’t convince its people to have more kids.

In 2023, India will take the long-held title of the world’s largest population from China. In August, state media reported that China’s fertility rate hit a new record low of 1.09 births per woman in 2022. The United Nations population replacement level is 2.1.

Together, these developments represent major headwinds to China’s economy.

“I think the government underestimated what the one-child policy would do,” China sociologist Doug Guthrie said.

Flipping the family-planning switch

After the Chinese Communist Party took control in 1949, leader Mao Zedong encouraged the Chinese to have many children, believing population growth would strengthen the country.

In a two-decade span, China’s population surged from around 550 million to over 800 million. By the 1960s, women on average were having more than six kids each.

“China had a massive population and needed to really think about economic growth in the context of that demographic bubble,” said Guthrie, who is director of China Initiatives at Arizona State University’s Thunderbird School of Global Management.

The CCP determined it was time for a course correct. In the 70s, the party launched a nationwide family planning program, promoting delaying marriage and childbearing, child spacing and limiting fertility.

The fertility rate plunged but by 1980, the CCP took it even further with the one-child policy. China’s fertility rate eventually dropped below the replacement level and after decades of low fertility, the CCP again tried to course correct. In 2016, the one-child policy became the two-child policy, and in 2021, they upped it to three. But still, the fertility rate dropped.

“They thought, ‘If we just take away the regulations, people will have more children and we’ll have a new demographic level growing up to help run the economy,'” Guthrie said. “And I think the cultural change was what the party underestimated because people didn’t immediately start having more children and bigger families. They thought, actually, a single child for two parents is the right number.”

China recorded its first population drop in modern history in 2022. China’s total population could be cut nearly in half by 2100, according to the UN’s medium projection.

I don’t think it’s catastrophic. This is still the second-most populous nation in the world. There’s 1.4 billion people. There’s a lot of people that still live in abject poverty who need to work in the manufacturing sector. And there’s a very robust, private economy.

Doug Guthrie, China scholar and sociologist

The age-old problem

It’s the rapidly aging population that’s of bigger concern for China’s economy. By 2079, there could be more people outside the working-age population than in it, according to the UN’s medium estimate. That would mean a lot of dependents for a shrinking workforce to take care of.

But while that is decades down the road and China’s working population is currently at its peak, there are already economic implications at play for the working age.

“Most of the consumption in a modern system happens when you’re in your 20s and 30s, when you’re buying cars and raising kids and buying homes,” geopolitical strategist Peter Zeihan said in a recent SAN commentary. “Because of the one-child policy, the Chinese don’t have much of a generation in that block at all. And since the one-child policy is now over 40 years old, we’ve now had a full generation of people to not have kids and that is manifesting in the data as well.”

Not only are they not having kids, there is a movement of young adults that are not buying into the grind. In China, it’s called the “lying flat” youth, where a generation is rejecting working long hours for little pay.

“Maybe this is a vestige of the sort of cultural residuals of the one-child policies,” Guthrie said. “If you have two parents taking care of you and then you go off to college, maybe you’re not so ambitious, maybe you do just want to lay at home and look on social media. So there’s a big demographic here that I think the government worries about. It’s not just about people not finding jobs, it’s people are not wanting jobs to be the engine of the performance as much as possible.”

For June, China’s urban youth unemployment rate hit a new record of 21.3%. July’s numbers are not publicly known. China said it would suspend reporting the data, mere months after it stopped publishing consumer confidence.