East Asia is getting too old to fight a war
East Asia’s ageing demographics will impact the region’s economic prosperity and political calculations, not least the decisions to go to war in the Taiwan Strait and elsewhere.
Not long ago, the Communist Party in China still restricted the total number of births per woman in the country. Known as the “one-child policy”, the main pillar of China’s population control scheme for more than 40 years, the policy was finally abolished about a decade ago.
In 2011, China started to allow two children per couple if both parents were single children in their respective families. Relaxation of the policy was further accelerated over the following years. Starting in 2014, a couple could have two children if one of the parents was a single child.
In 2021, this was extended to allow every couple to have three children. In addition, for any couple with three children, the government would provide subsidies in education and housing, as well as reduce their tax burden. In just a few years, the Chinese population policy has had a sharp reversal from regulating to promoting birth rates.
China will not be facing the ageing problem alone in the region. Indeed, we probably will see more aged people when we visit Japan, Hong Kong, Taiwan and South Korea...
Too little too late
Such a rapid change in population policy in recent years signifies that the government is aware of the urgent need to prevent population growth from plunging. However, the policy enactment seems too late and population decline has become unavoidable.
Since 2022, China’s total population has ceased expanding. According to the United Nations’ estimates, China will lose more than six million people over the next 20 years. More importantly, most of the Chinese population then will be aged, with more than 20% of the Chinese population forecasted to be 65 years old and over after 2032. The ratio is likely to climb to over 30% after 2050.
China will not be facing the ageing problem alone in the region. Indeed, we probably will see more aged people when we visit Japan, Hong Kong, Taiwan and South Korea where nearly 40% of the people there could be at least 65 years old in the next two decades.
The Chinese government might still hope that the reward measures for young couples could boost the total fertility rate (TFR), thus slowing down the ageing demography. However, this “China population boost dream” could go bust.
East Asian countries’ experiences show that it is not easy to encourage people to have more children. Despite decades of efforts to boost TFR through financial subsidies and other social welfare benefits, the TFR remains low in Japan (1.2), Taiwan (0.865), South Korea (0.72) and Hong Kong (0.75) in 2023. These ratios are far below the world average of 2.3, according to the data from the United Nations.
A hot war in the region, especially across the Taiwan Strait, is still possible, but the price could be too high.
Few immigrants and rising houshold financial pressures
Another reason for the unavoidable aging demography in the region is the relatively fewer immigrants. The number of immigrants as a percentage of the total population in Germany is 19%, 15% for the US, 14% for the UK, and 13% for France. Those Western countries will therefore remain relatively young thanks to the large number of young immigrants.
In comparison, the ratios for Japan, South Korea, and Taiwan are between 2% to 4%. In China, the number is strikingly low at 0.07%, according to the World Population Review.
People usually tend to save, rather than spend, when they expect to live longer. Economic growth will be likely to fall as investment and private consumption will not grow much. The financial burden on both governments and households will be much heavier due to larger social welfare expenses for the elderly.
Although the government debt to GDP ratios in East Asia (except Japan) are relatively low compared to that of Western countries at present, they could grow very fast in the next decade, along with the growing ageing population.
The household debt to GDP ratios in Taiwan, Hong Kong, and South Korea are already higher than in the US and the UK. If government social welfare falls short in covering elderly living and medical expenses, these ratios may climb higher, prompting governments to consider additional spending to alleviate household financial pressures.
Less resources for military
The decline of the working-age population and limited economic growth means that there will be fewer human and financial resources for the military. A hot war in the region, especially across the Taiwan Strait, is still possible, but the price could be too high.
Data from the World Bank reckons that China’s military expenditure as a percentage of GDP dropped from 2.4% in 1992 to 1.6% in 2022, and is less than America’s current percentage of 3.5%. Even though China could maintain the same percentage of spending over the next few years, the slower growth in GDP means that the actual amount of expenditure is going to be smaller.
The year 2049 will be the 100th anniversary of the establishment of the People’s Republic of China. It is also widely reported as the year for China to realise its dream of unifying the lost land of Taiwan. To ensure success in the war, China will have to strengthen its military muscles by spending more on the army.
Ironically, at the same time, China might find itself dragged by a population of nearly 40 million, almost 20 times more than the personnel in its current military, yelling for a pension.
Similar conflicting scenarios between military and social welfare expenditure could also be found in other aging societies in East Asia. So it is with life priorities that while the young can be motivated to fight on the battlefields for their country’s national interest, the old will be more interested in fighting for their retirement income.
