China’s Demographic Future Is Now

Perhaps the most shocking statistic that China published last year was the total number of births. At only 7.92 million in 2025, total births were less than half of the number a decade ago. Demographic headwinds to household consumption growth are a “gray rhino” for China’s economy—a clearly visible threat that is nonetheless neglected. The 2025 data pointing to double the population loss from 2024 suggest the rhino is now charging directly at China’s political and economic ambitions. Our estimates of trends in death rates suggest that China will lose nearly 60 million people in the next decade, almost the size of France, with the annual decline in 2035 to hit 7.6 million.

The headlines are bad, the regional breakdown is worse. The country’s most developed provinces are seeing falling populations, which will impact overall consumption and the future productivity of the labor force. The impact on household consumption is obvious, but the larger problem for Beijing may be the hit to social security funds. The fiscal subsidy to social security funds rose to a record 2.9 trillion yuan last year, or 10.1% of general budget spending, and appears set to rise in the future.

Much has been written about the demographic headwinds to China’s economic growth. But these threats are typically portrayed as over the horizon, a problem for the next decade. The 2025 population statistics should force a rethink of those assumptions. What has long been described as a “gray rhino” risk—a palpable threat that is nonetheless ignored—appears to be charging sooner than expected. Last year China’s population declined by 3.4 million people, compared with a 1.4 million drop in 2024.

Within that decline, the more concerning development for economic growth was its concentration in developed coastal provinces. Migration inflows boosted population growth in eastern Chinese provinces to a greater extent than natural births.

The impact from these demographic pressures has already been apparent, through tepid consumption growth, credit weakness, and lower interest rates. Beijing understands the problem and has tried to encourage new births. But experience from most other countries who have embarked upon pro-natalist policies suggests that the most Beijing should hope for is slowing the population decline rather than reversing it.

The 15th Five Year Plan includes an entire chapter on population, which was a new development and suggests Beijing’s current focus on demographic issues. Within government rhetoric, “investing in human beings” is becoming an increasingly popular phrase—but what it means remains in question. Migrant workers are likely the highest-return investments in human capital available to Beijing, both to boost new birth rates and to lift consumption in the medium term.

New births just fell to 1939 levels

Both deaths and births produced the sharp decline in China’s population last year (Figure 1). In 2025, the decline in new births was the most surprising. In the next decade, what will be more concerning is a likely rise in annual deaths.

New births

The drop in China’s birth rate in the 2020s has been shocking, even in the context of continuous declines since 2018. The ratio of new births to total population reached only 0.563% last year, compared to 1.199% a decade ago in 2015. The total of 7.92 million new births for the full year was the lowest level since 7.57 million in 1939, when China’s population was closer to 400-500 million people.

Admittedly, the number of women of child-bearing age has declined by 13% over the past decade to 213.7 million, but new births more than halved over the same interval. This reflects changes in behavior and preferences, as policy is now pro-natalist and has been far less restrictive since 2016, when the one-child policy was formally abandoned.

Chinese citizens’ decisions to marry and have children later in life are the main reasons behind the collapse in new births. The average age of people married rose to 34 years old in 2024, from 32.4 in 2018. As a result, the number of marriages declined by 40% from 2018 levels to only 6.1 million in 2024 (Figure 2). The average age of women bearing children increased to 30.1 years old in 2024, from 28.4 in 2018. These trends correlate well with additional education and economic advancements in other countries, and these factors are likely having an effect in China as well.

Another more recent factor that may be depressing births is the change in employment conditions. Alongside weaker economic growth, more workers have shifted to the gig economy, which does not provide security nor stable incomes. Additional discussions of potential AI-related job losses may be contributing to popular insecurity and uncertainty, which feed back into the birth rate as well. Social phenomena such as “lying flat,” “letting it rot,” or other societal trends developing within China’s youth also may be contributing to reductions in stable relationships and willingness to have children.

Beijing has unveiled several pro-natalist policies, with the most significant a 3,600-yuan subsidy per child for three years starting in 2025. But none of these measures are likely to have a meaningful impact on the birth rate, as they are not addressing the aforementioned headwinds. Everything Beijing is introducing now has been longstanding practice in Singapore, which has been the most aggressive in promoting new births: Even there, nothing has reversed the fall in the total fertility rate to another new low of 0.87 in 2025.

There could be some temporary rebound in new births, as in the auspicious year of the dragon in 2024, but the overall trend of falling births is likely to continue, particularly when the number of women of child-bearing age falls at a faster pace in the future.

Deaths

2025 total deaths increased modestly to 11.3 million from 10.9 million in 2024. But deaths are expected to rise by a much faster pace in the years ahead. The average age at death in China is around 73 years old at present by our calculations (Figure 3). Note this is different from China’s average expected life span, at 79.25 years for 2025, which is based on expectations for someone born in 2025.

The average age at death is meaningful because 70-75 years ago, China had a baby boom, with new births in 1952 spiking to 17.2 million from 14.4 million a year earlier and staying in this range through 1958 (Figure 4). Three years later, the second (and largest) baby boom came into shape in 1962 after the worst of the famines caused by the Great Leap Forward, with new births skyrocketing to over 20 million a year for over a decade. Health care and elder care have improved in China in recent years, but it is reasonable to expect a surge in deaths from those born in the 1950s in the decade ahead.

Using age-specific mortality rates from 2024, we can estimate how many people at each age will continue living next year, the year after, and so on over the next decade. Because of much higher mortality rates at older ages (Figure 5), the aging population suggests annual deaths will grow very fast in the coming years, reaching around 15 million per year by 2035 (Figure 6). China’s mortality rate has remained quite stable at around 0.7% for many years, despite improvements in the health care infrastructure.

Even if new births remain at 2025 levels for the next decade, under these estimates the natural population decline will widen to 7.6 million in 2035, with the calculation implying that the overall population will decline by nearly 60 million between 2026 and 2035.

Developed regions face declining birth rates

Regional differences are meaningful for China’s economic outlook as well. Ideally more developed regions would see stronger birth rates, creating the potential for stronger consumption growth and a higher-skilled labor force in the future. On the surface, coastal provinces reported population growth, but most of these provinces are reporting negative natural population changes (Figure 7), with most growth from migration.

Zhejiang province reported a rise in population of 430,000 in 2024, with a natural decline of 24,000 that was offset by inflows from migration totaling 450,000. Jiangsu saw a decline of 213,000 people via natural population changes, matched by migration inflows.

One outlier among developed provinces was Guangdong. Along with its two relatively underdeveloped neighbors, Guangxi and Hainan, these three provinces consistently reported strong natural population growth in recent years. There are several reasons for Guangdong’s stronger population growth. First, the province still contains large rural areas where birth rates are typically higher, especially in the province’s western mountainous regions. Second, all three provinces were also historically sheltered from wars, allowing child-bearing and child-rearing traditions to be better preserved. These traditional beliefs also emphasize the importance of having sons (Guangdong had the worst sex ratio in the 2020 census, followed by Hainan). For Cantonese girls, Zhaodi, Laidi, and Lingdi are popular names—and they all suggest the next child will be a boy.

The Rust Belt region in northeastern China also warrants discussion here, as these provinces have some of the lowest birth rates despite economic underdevelopment. Yet educational levels also impact birth rates, and these provinces still have high levels of education on average. Measured by the proportion of women with a college diploma and above, Liaoning and Jilin ranked fourth and sixth among all Chinese provinces (excluding Beijing, Tianjin, and Shanghai where numbers are distorted). Guangdong is only tenth in education levels on average, despite the number of renowned universities in Guangzhou.

The bottomless pension hole

The economic impact of these demographic pressures has been clearly observed in other Asian economies, particularly South Korea and Japan. Typically, this points to weaker demand, lower investment, deflationary pressures and lower interest rates. We have written several notes discussing these effects in the past (June 2021, “Demographic Change and China’s Potential Growth”).

But the demographic pressures on China’s fiscal balance are likely still underappreciated. In 2025, Beijing spent 2.9 trillion yuan to fill the deficit from the social security fund, accounting for 10.1% of last year’s general budget spending. The deficit is likely to widen further given the aging of the population. The dependency ratio (number of working people supporting one elderly person) was around 4.4 in 2024 but will fall to 3.5 people in 2030 and 2.8 by 2035, based on our calculations.

On the surface, the size of the social security fund grew another 1.5 trillion yuan last year to lift the total balance to 16.0 trillion yuan. But without the 2.9 trillion yuan in fiscal subsidies, the social security fund would have reported a deficit of 1.4 trillion yuan (about 11 years to deplete the current balance without assistance from fiscal subsidies). The largest hole within the social security fund is from the pension fund, with a total of 6.9 trillion yuan in spending in 2024 against 5.8 trillion yuan in income. The pension fund alone received 1.9 trillion yuan out of 2.6 trillion yuan in total fiscal subsidies.

China’s falling population is one reason we remain more conservative in projections of consumption growth relative to the market. Employment conditions are weakening and income growth is slowing. Total disposable household income (5%), salary income (5.3%) and even business operation income growth (5%) have all slowed to their lowest levels last year, outside of COVID-impacted 2020 and 2022.

The hope for Beijing to increase households’ propensity to consume rests with migrant workers. Unfortunately, there is no sign that investments in equalizing migrant workers’ pensions so they can become urban citizens will accelerate, based on the 15th Five-Year Plan. Beijing is trying to put this burden on companies, individuals, and local governments instead of spending out of the central government’s own pocket.

Beijing has downgraded the average pace of GDP growth needed to meet its 2035 goals to 4.2% from the previously projected 4.8%, in part because of China’s declining population. Still, the NDRC only expects a 0.2% annual drop in population in the coming decade, which appears optimistic in our view. China’s demographic future is already impacting investment and consumption growth in the present, and further downgrades in long-term economic growth projections are probable.