Weekly Buzz: From China to India: The Great Population Shift
🥇 Beyond India’s new milestone looms Asia’s demographic cliff
For decades, China held the crown as the world’s most populous country. Those days will soon come to an end, based on United Nation projections.
According to the UN data released last week, India’s population will reach 1.4286 billion by mid-year, surpassing mainland China’s 1.4257 billion. For reference, the populations of North America and Europe together amount to 1.1 billion – or about 300 million people short of either giant.
The report verifies trends that have been ongoing for quite some time. The UN estimates that India’s still-young population will continue to grow before peaking sometime around 2064. In contrast, China’s ageing population is expected to continue to shrink after posting its first year of decline in 2022. Based on projections by the Shanghai Academy of Social Sciences, it could fall to 587 million by 2100, less than half of today’s number.
🧓 East Asia’s demographic dilemma
India’s surging population is only one side of the story – on the other side is a “demographic cliff” that will pose a challenge to many of the region’s economies.
A prime example: Japan, where its population is rapidly ageing and has been shrinking for more than a decade. World Bank data show that the share of working-age adults (or those between 15 and 64 years old) in the world’s third-largest economy is expected to dwindle to 51% by 2050 from about 59% currently.
In the near term, a shrinking workforce places added strain on a country’s access to labour – already a major issue in many sectors in Japan. Over the medium to longer term, these demographic challenges add to headwinds for the economy as they lessen labour supply, weigh on productivity, and (ultimately) drag its growth potential.
But Japan isn’t the only country in the region facing a rapidly ageing population. By 2025, both South Korea and Taiwan are projected to be “super-aged” societies, where more than 20% of the population are aged 65 years and older. And in general, the challenges associated with ageing populations are ones that many industrialised economies will soon have to come to grips with.
As we noted in our CIO Insights in March last year, ageing populations tend to have a greater need for disease prevention, diagnosis, and treatment – which means higher demand for healthcare spending. If you’d like to add exposure to the longer-term trends in this space, check out our Healthcare Innovation portfolio.
👶 India’s youth could hold the key to its future
India’s booming population is not only large but young: more than half are under the age of 30 and more than two-thirds are of working-age. If – and that’s a big if – the country is able to harness this demographic dividend, India could unlock significant economic potential and gain a bigger seat at the international table.
Ultimately, the relationship between population and economic growth is complex. A young, growing population can be a boon for an economy. But if it grows too rapidly, that can be a hindrance to socioeconomic development. And even within economies, there can be diverging trends. In fact, India’s situation is more nuanced than the headlines suggest: in some of its more-prosperous and educated states, populations are already starting to decline.
🌎 What else we’re watching this week
🪅 Big Tech’s Q1 earnings beat expectations
Tech stocks have rallied since the start of the year as investors flocked to Big Tech in search of a safe haven. This week, we got an idea of just how right they were as several blue-chip tech companies released their first quarter earnings. Despite analysts’ expectations that Big Tech firms would register a drop in profits, Meta, Microsoft and Alphabet’s posted better-than-expected quarterly results.
👁️ Keeping one eye on inflation
On Friday, we’re set to receive two key pieces of data to better understand where inflation stands: March’s core PCE price index – the US Federal Reserve’s preferred gauge – and the employment cost index (ECI) for Q1. The Bloomberg consensus estimate is for the core PCE to hold steady at 0.3% month-on-month, and for the ECI to show a slight pickup in wage gains.
That would suggest inflationary pressures have not quite subsided – adding to the case for another rate hike at the Fed’s next meeting in early May. Looking further ahead, chatter from the FOMC suggests a pause may be in store after May.
🎓Jargon buster: Demographic cliff
A demographic cliff refers to a rapid drop in population growth due to increasing life expectancies and declining fertility rates that can precipitate a slowdown in economic activity. And as history tells us, once a country has gone off the cliff and into population decline, it can be difficult to reverse.
Demographic cliffs can weigh down a country’s economy because there aren’t enough working-age people to fill jobs. Simultaneously, a smaller, younger generation is then left to bear the increasing costs of caring for the elderly. Another definition by economist Harry Dent suggests that demographic cliffs can lead to consumption cliffs as there are fewer people of working-age who are able to consume goods and services.
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