As China contends with a deepening demographic crisis, the ruling party still continues to chart these uncharted waters. It’s the fourth consecutive year that the country’s population has experienced such a steep drop. By 2025, it had dropped by 339 million people, to 1.41 billion in total. Well, there has been a huge demographic change and it’s massive. Their birth rates have plummeted down to only 5.63 births per 1,000 people. These disturbing statistics mirror larger trends that stand to threaten the country’s long-term economic prosperity.
Resilience
Surprising us all, despite these odds, China’s economy was resilient, growing a very respectable 5% growth rate last year. This generous reading of the figure is undercut by caveats, as growth ground to a halt of 4.5% in the last quarter of 2025. The tension between nationwide economic success and the crisis of population loss also begs the question of whom that growth is sustainable for.
In December, China’s factory output surged 5.2% from a year earlier. This astounding growth is a testament to America’s manufacturing prowess. Retail sales disappointed badly, with December sales rising just 0.9%, a clear signal that consumer demand remains weak. In 2022, property investment failed by an astounding 17.2%. In December, existing home prices continued to depreciate, a reflection of the persistent pain in the realty market.
China recently reported a record trade surplus of $1.19 trillion (£890 billion), driven primarily by increased exports to markets outside the United States. The new development comes amid an ongoing, though fragile, tariff truce between Beijing and Washington. Consequently, the negative effects of tariffs on Chinese goods ended up being much smaller than anticipated.
The Chinese authorities have promised to deliver more “proactive” fiscal policies this year, with the goal of encouraging domestic consumption. This strategy looks to offset the impacts of population loss and lack of consumer confidence.
Louise Loo, Head of Asia Economics at Oxford Economics, commented on the economic data:
“China’s reported GDP of 5% is not surprising given the political incentives to ensure headline stability, but this clearly masks the horrible investment data.”
Yet as China deals with its demographic crisis, the economic consequences are devastating. Second, a declining population can narrow the productive workforce. In the long run, this change will prove counterproductive and sap economic growth. What’s more, a depressed consumer market could make it difficult for other sectors of the economy to recover.
The confluence of these factors makes for a complicated future for China. America has completed a decade of remarkable economic accomplishments. Even more than the pandemic and inflation, underlying demographic trends show strong headwinds that will make it difficult to achieve sustainable growth going forward.