China is to report its first population decline in five decades.
Zhiwei Zhang, the Shenzhen-based chief economist at Pinpoint Asset Management explains, "The consensus expects China's population to peak at 2027, based on the projection made by the United Nations. This would be much earlier than the market and policy makers expected."
The birth rate has continued to decline. That is partly because urban couples, particularly those born after 1990, value their independence and careers more than raising a family, despite parental pressure to have children. Rising living costs in major cities, where large populations lead to the birth of a huge number of babies, have also deterred couples.
Policymakers will need to come up with family-planning incentives and arrest a falling birth rate, with the world's most populous country at risk of entering an irreversible population slide if effective measures are not found. Falling birth rates and a fast greying society will add pressure on the working-age population and hit productivity.
"China would likely have to relax the birth control policy completely and put off the retirement age faster," Zhang said.
"Our projections using the pre-census figures already suggested that the workforce would be declining by 0.5% each year by 2030, with a similar impact on GDP," Capital Economics wrote.
In 2010, the proportion of the population aged 14 or younger plunged to 16.60% from 22.89% in 2000, an effect of a decades-old one-child policy. Citizens aged 60 and older accounted for 13.26%, up from about 10%. The continuation of those trends will undermine China's working-age population and weigh on productivity. A shrinking pool of working adults will also test its ability to pay and care for an aging nation.