China's Population: A Mystery Wrapped in a Riddle...

05/04/21 03:04PM EDT

Below is a complimentary Demography Unplugged research note written by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.

China's Population: A Mystery Wrapped in a Riddle... - 5 4 2021 3 00 53 PM

Is China on track to report its first population decline in six decades? The country’s decennial census results have been mysteriously delayed, which insiders say reflects a dreaded population dip—one that the government has denied. (Financial Times)

NH: It's not often that demographic news triggers something close to a geopolitical incident.

But that's what this FT story did. It reported that China's highly anticipated 2020 decennial census had indeed been completed, but also that the leading government agency (China's National Bureau of Statistic or NBS) was holding off on releasing its top findings.

Why? Apparently, some analysts within NBS were whispering that the results for 2020 showed a total population decline from the previous year. In January 2020 the PRC proudly announced that China's population had pushed (barely) over 1.400 billion for the first time. Clearly, to announce that China had fallen back again would be a serious loss of face.

Keep in mind that India's population is now 1.339 billion and is expected to surpass the 1.4 billion mark by 2026. Every demographer, including those in China, understands that India will certainly surpass China in numbers within the next decade--by 2027 according to both the UN and the US Census IDB, if indeed India hasn't already surpassed China (see below). China's population is itself due to peak and start falling by 2030.

Every PRC official understands that this is a sensitive issue. According to quoted NBS statisticians, the blow to China's numero uno self-image will require "careful preparation" and "close attention to public reaction."

China has been the most populous country on earth for longer than Christianity has been around--probably since as early as 221 BCE when the First Emperor of Qin (Qing Shi Huang) conquered other warring states to establish a unified empire. So a lot is at stake. The last time China suffered a population decline was during the "Great Leap Forward" famine of 1960, which the government is understandably loathe to discuss.

At his next party plenum, President Xi Jinping won't be eager to announce that China must now "de-celebrate" its passing of 1.4B. Still less does he relish the prospect that it will be under his watch that the Middle Kingdom must fall below the first rung for the first time since the mighty Qin.

Here btw is the FT's chart on China's population since 1949, showing a (presumed) slight decline in 2020.

China's Population: A Mystery Wrapped in a Riddle... - May3

Western readers may not have paid much attention to the FT story. But Chinese political leaders sure did.

The next day the CCP-directed newspaper Global Times reported that a numerical drop in 2020 was unlikely--and if it did occur, it would be a "statistical blip." Interestingly, the paper added that a decline "was possible" in 2021. And a day after that the NBS issued a one-sentence announcement on its website that China's population did indeed increase in 2020 over 2019. But it issued no further clarification or any information on when the census results would be made public.

So what's going on?

Let's start with some background. China, like most countries in the world today, follows the example first set by the United States in 1790 according to its new constitution: It conducts a census of the national population every ten years.

(A few, like Japan and Canada, follow the Roman example and do it every five years.) China conducted its first census in 1950 (1953, to be precise), so the 2020 census will be China's seventh. A census, in theory, requires an actual enumeration of people living in every household. This usually makes it the best available measure of the actual national population on the census date.

But since a decennial census happens only once every ten years, you might ask: What about the other years? Well, countries extrapolate from the last census by making estimates, usually based on other official numbers (like birth and death records) or on monthly or yearly surveys of randomly selected households.

These are always less accurate than the decennial census. Thus, every time a new census is conducted, the annual estimates of the prior nine years are revised upward or downward to "fit" the new decade-ending landmark. This year, both China and the United States and a slew of other countries will be doing just this for 2011-2019.

Every new census, therefore, poses two questions. First, how credible are its findings? And second, to the extent they are credible, how radically do they revise the prior decade?

China's official demographic numbers are problematic on both counts. Like so many other official statistical agencies in China, the NBS suffers from inadequate transparency. Neither its sources nor its methods are fully made public.

When outside demographers raise questions or problems, the NBS often offers no response--and some higher officials may question the demographers' patriotism. The NBS's results may themselves be effectually over-ruled by other more powerful agencies in determining China's "official" numbers. As a result, even Chinese agencies sometimes cite very different numbers for everything from China's population and mortality rate to its total fertility rate (TFR) and sex ratio.

China's decennial results are widely regarded as credible, simply because it's hard to know what better numbers to believe.

Still, some experts--generally, not residents of China--do attack them. Shailendra Raj Mehta, director of India's MICA Institute, is among those who claim that China's decennial censuses are not internally consistent.

He observes, for example, that the number in an age bracket in one census does not track reliably with the number in the 10-year-older age bracket in the next census. In his opinion, China is trying to over-estimate its population. "After nearly 40 years of collective malfeasance," says Mehta, "Chinese population statistics must rank as the least reliable in the world."

A bit more extreme, and notorious, are the views of Yi Fuxian, a professor of reproductive health at U Wisconsin-Madison. (See "China's One-Child Policy is Over but Chinese Fertility Rates Still Low.") Yi, who left China in 1999, still actively counsels women in China who want to escape forced abortions. He believes that the CCP knowingly inflates official population totals in order to justify the authoritarian family-planning bureaucracy and to assure the public of China's future prospects.

Today, Yi estimates that China's actual population is smaller than 1.4 billion by some 140 million. He also says that China's population is already declining, that India may have already surpassed China in numbers, and that China's economy will never surpass that of the US. He maintains a 140K Weibo following in China, and, after first banning his books, China now allows him to return and lecture at demography gatherings on the mainland.

China's intra-decennial estimates, on the other hand, draw a much larger number of critics. On the elder end, it is widely believed that the NBS faces an under-reporting of deaths.

And at the younger end, it faces an under-registration of births--mostly because many mothers don't want to face penalties for births above the limit or attract other forms of unwanted attention from hukou authorities.

Because these two problems work in opposite directions, no one knows what the net effect is. Yet because they are recognized, the NBS introduces various fudge factors, based on earlier decennial censuses, to try to correct for them. And that's not all. Since many provincial and city authorities are granted subsidies for the number of people they serve (just like congressmen in the US), it's in their interest to inflate the numbers once people are old enough to attend school or vote in their region. This may lead to the sorts of "internal inconsistencies" that Mehta complains about.

The fudge factors for new births are obviously critical. To compute them, statisticians typically wait until newborns reach age 7 or 9 and then compare these "known" counts of kids (say in schools) with registered birth numbers 7 or 9 years earlier.

Or, better, they can take the 10-year-old count in a decennial census and compare that to registered births 10 years earlier. Unfortunately, this leads to "correction factors" that are hopelessly out of date and replete with slippage.

Back in 2007, Wolfgang Lutz, head of IIASA, a world-renowned demography think tank based in Vienna, coauthored a paper on China's total fertility rate. He reviewed over thirty expert estimates for China's TFR in 2000 and found that they had a huge variance, from 1.2 to 2.3. Most came to values under 1.5--in a year when the UN and World Bank were both estimating about 1.6. He also concluded, even back then, that the key assumption in all the estimates was how much to compensate for the alleged under-registration of births.

More recent studies show these problems haven't gotten any easier with the passage of time. And because the birth estimates are malleable, they have become subject to political pressure by various agencies.

The Health and Family Planning Council (NHFPC), which runs the child-limitation policies, favors higher reported births in order to maintain support for its mission. It reports the party line--that the TFR is still close to 1.8, which is well above the UN and World Bank estimates (now just below 1.7).

But until recently the NBS continued to make available its unadjusted annual fertility micro-surveys--until all the surveys since 2016 suddenly and without explanation disappeared from its website. These unadjusted data point to TFRs declining from about 1.4 fifteen years ago to about 1.0 by 2018--something close to Yi's nightmare.

So have low TFRs now become politically unmentionable? By no means. A growing number of Chinese demographers (see for example here and here) now favor TFR estimates beneath the World Bank's. The PBOC, in a footnote in a recent paper drawing much attention, conceded that China's TFR is probably between 1.0 and 1.5 and certainly below the official planning assumption of 1.8.

The high-ranking Civil Affairs Minister Li Jiheng warned, in a recent publication, that a "dangerous drop" in the birth rate imperils China's future and makes higher fertility a top national priority. Like the PBOC, Li cites slightly adjusted NBS data pointing to a TFR hovering between 1.0 and 1.5 in recent years and showing no improving trend over time.

Bottom line: There is no unified PRC conspiracy to lie about China's population. There is however a somewhat untrusted decennial census--and a very untrusted annual updating procedure. These have given rise to a wide diversity of views about both the size and direction of China's population.

So let's now return to the news hook. What does all this have to do with the current brouhaha over NBS's nonrelease of the 2020 Census?

IMO, this is what it probably means.

Recall that I said that a new census almost certainly offers a much more accurate picture than the annual NBS updates after nine years. Very likely, China's latest census is also significantly more accurate than its earlier censuses--in part due to widespread real-time digitization of all record keeping and to the widespread adoption of chip-imbedded national ID cards which resolves all the old conflicts between records kept by different provinces and hukous.

It's the very accuracy of this new census which is probably causing the PR headache for the PRC's triumphalist brand. (CCP officials endlessly repeat Xi's mantra: "The East is rising, and the West is declining.")

What happened, I suspect, is that an accelerating recent decline in China's birth rate was kept hidden by a growing and outdated compensation (or fudge) factor for under-reporting. A widening gap between actual and estimated births since 2010, in addition perhaps to some overcount in 2010, may have led to a very disconcerting drop by 2020 relative to annual estimates--a drop now revealed by the new census.

How much of a drop? Well, I'd say a reasonable guess is that births may have been overcounted by about +15% per year during the 2010s. That would mean 2.5 million fewer births per year or about 25 million fewer people by 2020. China's population is currently rising by about 5 to 6 million per year. So instead of celebrating a further rise to 1.405 billion in 2020 (starting with last year's estimate for 2019), China would find itself back to about 1.380.

So yes, if this happens China would have to find some way to de-celebrate its 1.4B passage. Or find some creative way to redefine its population. (Throwing in a reasonable estimate for Hong Kong and Taiwan, at 7 and 24 million respectively, would do the trick!)

But it would probably not mean that China's population suddenly falls in 2020. That's because all the earlier intercensal years since 2010 would also be lowered in a pro-rata fashion, meaning simply a slower growth trajectory since 2010. So the single-sentence NBS announcement might well be valid: the population would not fall in 2020.

What further confuses the 2020 results of course is Covid-19. To be sure, China's total reported deaths from the pandemic in 2020 (fewer than 5K, with zero deaths since last April) defies credulity. Nor has the NBS offered any preliminary look at excess mortality in 2020. In a census, though, everyone alive has to be counted in every household--in this case, as of the evening of October 31st. It's not easy for a hard-working bureaucracy to invent the existence of people who don't exist.

And while the pandemic's impact on deaths may make a surprise appearance, the pandemic's impact on births is sure to be felt. This February China reported a -15% YoY plunge in registered newborns in 2020. (See "Registered Births in China Tumbled 15% in 2020" and "China's Birthrate: Lowest in 70 Years.") That's 2 to 3 million fewer infants right there. Most of this decline was due to fewer pregnancies initiated well before Covid-19 arrived. But the virus came early to China, and it surely pushed births down decisively in November and December of last year.

This may explain the Global Times' enigmatic admission that a one-year population decline, if it does not happen in 2020, may well happen in 2021. The writer may be echoing the NBS's expectation that a pandemic-related suppression in births will be stronger in 2021 than in 2020--which seems to be true as well in most of the developed world.

Many further questions about the 2020 China census are worth asking.

For starters, why did the compensation formula for under-registration of births get so out of hand? Why are many experts so certain that something is very wrong with China's official "1.8" TFR? Beyond its impact on the population number, how much will the 2020 census change our estimate of China's current TFR--and how will that in turn affect forecasts of China's population moving forward into the 2040s and 2050s? Will all this attention to China's demographic challenges push the PRC's social and fiscal policies more rapidly in the direction of pronatalism?

Stay tuned. I'll answer all of these questions in another NW next week.

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Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.

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