Chinese economy

Policy brief

published: 5.10.2023

To what extent can urbanization mitigate the negative impact of the population ageing in China?

Alicia Garcia Herrero

Jianwei Xu

In this policy brief, Alicia García-Herrero and Jianwei Xu takes a closer look at the population ageing issue in China and what effect it will have on Chinese labour force and GDP growth. However, to answer these questions we will first need to have a better understanding of urbanisation trends and projections in China, and how these will affect the impact of the ageing issue.

Doing so, the authors find that the collective impact of the ageing and urbanisation changes up until 2023 will in fact be moderately positive for Chinese growth. However, when looking further ahead (the 2035-2050 time period), fertility rate decline will begin to affect the working-age population in both rural and urban areas, especially since the urbanisation process is expected to level off by then. In such circumstances, China’s shrinking population will shave off 1.4 percent from GDP growth annually.

An unknown factor in this, which may affect the projections, is the effect of population ageing on labour productivity. This is not accounted for in the policy brief, and China’s fast move towards robotisation and artificial intelligence might indeed help mitigate any negative impacts by increasing productivity. There is, however, no sign yet that this is the case.

About authors

Alicia Garcia Herrero

Chief Economist for Asia Pacific at Natixis, Senior Fellow at Bruegel, Non-resident Senior Follow at the East Asian Institute, Adjunct Professor at the Hong Kong University of Science and Technology

Economist specialized in monetary and financial issues in emerging markets, banking crises and resolution strategies, financial development

Jianwei Xu

Senior Economist for Asia Pacific at Natixis, Non-resident Fellow at Bruegel

Specialist in international economics, labour economics and Chinese economy