Illustration: Xia Qing/GT

After hyping property market issues and discrediting the country's "zero-COVID" policy, doomsayers of China's economy in some Western countries this week shifted their sights to China's newly published birth rate.

Data released by China's National Bureau of Statistics on Monday showed that China's total number of new-born babies last year reached 10.62 million, with a net increase of 480,000 deducting deaths, with both numbers hitting record lows. 

The New York Times on Tuesday said that China's "demographic crisis" could "undermine its economy."

Such viewpoints seem quite concerning at the first glance, but in fact it is just as untenable as the other opinion that the dynamic zero-COVID policy will undermine China's economic growth. Badmouthing China's economy by exaggerating the downside of the low birth rate and aging issue will, as usual, collapse on itself.

The major argument of the Western doomsayers is that China's falling birthrate could result in labor shortages, which could impact economic growth. Admittedly, in theory, the reduction of China's labor force will directly lead to a slowdown in GDP growth. 

Yet, such an analysis obviously ignores an economic truth - in addition to the demographic dividend, there are many other economic dynamics running in China's economy.

Historically, many major economies have experienced periods when birth rates had declined but their economies kept to expand rather quickly. Obviously, this part of economic growth is not driven by demographic dividend, but driven by factors such as technological progress, industrial upgrade, and financial innovation.

Regarding the current state of the world's second largest economy, it is now in the process of transformation from a manufacturing economy to a digital economy. As population growth reaches an inflection point, the driving force for institutional and technological innovation, economic structure changes and growth are expected to be further released.

Under the current economic and social context, China's per capita resources will increase, and per capita income will grow even faster, which will bring innovation dividend to economic growth. The improvement in education and per capita welfare level will result in the technological innovation and industrial upgrading in the economic arena. These two goals are expected to be realized sooner than expected in the country.

China has established roughly 24,000 industrial parks, and the production capacity far exceeds the consumption capacity. In the future, with the economic development of India, Pakistan and many African countries, global production capacity can be expected to run a surplus for a period of time. 

Therefore, the future growth of China's economy cannot be based on expanding workshops and assembly lines in the 24,000 industrial parks, but to find new industrial and technological breakthroughs.

In the plan to facilitate the development of the digital economy detailed in the 14th Five-Year Plan period (2021-2025) rolled out last week, China provided further context on the primary tasks in the digitalization process. China will enhance key technological innovations, accelerate the cultivation of new business models, and try to foster a prosperous and well-managed innovation ecosystem, according to the plan.

The economic growth rate brought about by the digital construction of existing industries could be much larger than the scale of traditional investment in manufacturing. According to estimates, this growth space is 10-15 times larger than traditional manufacturing sector. In the newly published plan, China aims to raise the proportion of the added value of core digital economy industries in its GDP to 10 percent in 2025, up from 7.8 percent in 2020. In the process of digitization of the Chinese economy, the country will find more new growth points and driving forces other than the demographic dividend.


The article was compiled based on an interview with Cao Heping, an economist at Peking University. bizopinion@globaltimes.com.cn