July 22, 2024: China looks forward to becoming the largest economy in the world by the end of the decade, and a military superpower a decade after that. Longer term the outlook is less promising. Time is not on China’s side. There are numerous examples of this. One of the more obvious is the shrinking Chinese work force and population in general. The overall population growth rate peaked in 2016 at 0.59 percent and has been declining ever since. There is a worse problem with the shrinking labor force because of the declining working age population. All this began in 2014 and will continue for decades.

The biggest problem, though, is the growing shortage of workers. As the population ages, all those one-child families means there will be more elderly than the economy, and the shrinking workforce can effectively support. Currently there are ten working age Chinese for every retiree. By 2050, there will only be two for each retiree. At that point retirees will comprise 30 percent of the population versus 15 percent now. Traditionally, children cared for their parents in multi-generation households. That model is dying out, and China is faced with huge pension cost increases at the same time they expect their economy to be the mightiest on the planet. But at that point the largest single government expense will be the care of the elderly, and this will impose crushing taxes on those of working age. Many working age Chinese are worried about this as there is no easy solution in sight. China tried in 2013 to relax the one-child policy but the newly affluent Chinese are less eager than earlier generations to have a lot of children.

To make matters worse there is not much in the way of pensions or health care for most of the elderly to begin with. The government recognizes this is a real problem but does not, and will not, have the cash to deal with it. The population shrinkage is accompanied by another problem. Since the 1980s many of those couples forced to have only one child aborted a child if it was a female, because much more importance is attached to having a male heir. There are nearly 40 million more males than females in China and the disparity is growing. These surplus males are coming of age, and the competition for wives is causing problems. Women are taking advantage of their scarcity but men are also going to neighboring countries to buy, or even kidnap, young women to be wives. This is causing ill will with neighbors, where females are enticed or coerced, often kidnapped by criminal gangs, to become wives of Chinese men who have no other options.

It’s not just brides who are moving to China, foreign workers are being imported. These will not become permanent residents because China, like most East Asian nations, discourages that practice. There are still more Chinese leaving than foreigners entering as permanent residents. It’s these migrants, temporary or permanent, that will become increasingly important in the next few decades for dealing with the rapidly growing labor shortage.

It’s not just population growth that is slowing. A decade ago, it became clear that the years of ten percent a year GDP growth were ending. Not just because economic growth was slowing, but because the central government was finally forced, for the first time, to go public and admit that false economic data had been provided to the central government by provincial officials for decades. Since 2014 Chinese officials have become more open about the problem and have managed to obtain accurate economic information for such things like annual GDP and unemployment rates. Apparently Chinese GDP has not been growing steadily at nearly ten percent a year for decades. Chinese officials do eventually, within months or years later get more accurate data and while Chinese GDP has actually been steadily growing over the last three decades, the annual growth actually varied between 5 and 15 percent. Chinese official policy was to keep everyone calm by issuing less variable annual growth rates. In short, the official numbers were doctored.

For more accurate and immediate indicators of economic activity, Chinese and foreign economists and business leaders use things like electricity production, railroad traffic and similar data that cannot be manipulated by local officials to make their city or province look more successful. Many financial experts inside and outside China feared that all this official manipulation of economic data, an ancient practice in China, is masking some serious economic problems that could go sideways at any time, causing a banking crisis that would paralyze the economy for a while and cause political chaos. It’s very much a crouching tiger and hidden dragon situation. This is an ancient phrase warning that behind seeming success and talent lurks the possibility of imminent disaster. Chinese are ever mindful of this sort of thing.

Affluence has not just reduced the birth rate but increased the drug addiction rate. China will not release official figures but it is estimated, using data on arrests, drug seizures and related issues that there are over 20 million addicts in China and that this is rapidly increasing. This is happening despite vigorous government anti-drug efforts. Arrests for drug offenses have increased more than ten times in the past decade yet the drugs keep coming in, especially from neighbors like Burma, North Korea, Thailand and Afghanistan.

Since the Chinese Communist Party is under growing popular pressure to do something about the rampant corruption in China, and specifically in the Chinese Communist Party, it has been arresting and prosecuting a growing number of senior officials. New anti-corruption measures were announced in 2015, including more scrutiny of senior officials and large corporations, which are the ones that pay the largest bribes. For years most Chinese believed the anti-corruption effort was having little impact. But in the last decade there have been believable indicators of progress. This comes in the form of declines in gambling, which is a favorite activity of corrupt officials. Gambling is legal in the coastal enclave of Macau near Hong Kong, where most of the legal gambling takes place. Macau is a special administrative region that had been under Portuguese control from 1557 until 1999. Macau had prospered because it had a market economy free of interference from the Chinese government. This included legalized gambling. Macau became the largest center of legal gambling in the world, generating seven times more gambling revenues than Las Vegas in the United States. Chinese are among the most avid gamblers in the world and long represented much of the activity in Las Vegas. With the Macau gambling operations, a lot more Chinese can gamble closer to home. Gambling revenue accounts for half the Macau GDP. After 2013 annual casino revenue declined because of government crackdowns on gambling. This was something the wives and families of gamblers had long demanded.

It’s not just drugs and corruption the government is cracking down on. Visible dissent is also a major target. The government has rehabilitated some old Maoists and encouraged a new generation of communist zealots to find and crush criticism of the government. This includes unauthorized discussion of corruption, criticism of communism or the Chinese Communist Party. This thought control is becoming more of a nuisance to Chinese, which is not good news for the government of the world’s largest communist police state.