Beijing
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China’s birth rate has reached historic lows, raising fears of major economic shocks in the coming decades as the country’s vast workforce dwindles and its population of retirees collects pensions.
Data released last month showed that a flurry of policies by Chinese authorities to encourage parenthood, from cash transfers to tax cuts to new rules to make marriage easier, have so far failed to stem the decline.
But the country is also looking to other solutions: robots and automation.
Chinese leader Xi Jinping has for years overseen a push to upgrade and automate the country’s manufacturing industry as part of Beijing’s goal to transform the country into a self-sufficient high-tech powerhouse.
That movement, which is now converging with Beijing’s rush to rebalance its population, threatens to collapse pension systems, soar family health costs and crush productivity, plummeting trust in public institutions and economic output if left unaddressed.
“If[China]continued in exactly the same way as it has for the past 20 or 30 years, it would be a massive crisis because of the mismatch between the demographic system and the economic system. But why would they do that?” said Stuart Gietel-Basten, a demographer at the Hong Kong University of Science and Technology.
Experts say China’s automation and AI efforts, along with other adaptation measures, could go a long way toward keeping economic growth from falling off the demographic cliff, at least for the next few decades.
But managing a high-tech transition that will put people out of work in the short term and change the nature of work in the long term is a challenge for governments around the world. Especially in a country of 1.4 billion that has built decades of growth on the back of a huge workforce.
And the stakes are especially high for the ruling Communist Party, which has made economic stability its legitimacy and aims to transform China into a “mid-level developed country” within the next decade.
Experts say the Chinese government’s current preparations will have long-term implications for the global economy and generations to come, and that it goes beyond simply trying to halt the decline in birthrates.
“If China can achieve sustained improvements in labor productivity through robots, digitalization and AI, it will be able to maintain or increase industrial output even with fewer workers on factory floors,” said He Guojun, an economics professor at the University of Hong Kong.
This means that “automation can significantly mitigate, but cannot completely neutralize, the economic impact of a reduced workforce, especially in industrial production.” But the impact will vary by industry, he added, and success will require a “combination of policies” from education to social security.
According to the International Federation of Robotics, China is already the world’s largest market for industrial robots, with more than half of the robots installed worldwide by 2024.
Robotic arms across the country are working together to weld, paint, and assemble products on highly automated lines and even in “dark” factories without wasting power by keeping lights on for human eyes.
High levels of automation have enabled Chinese factories to produce cutting-edge electric cars and solar panels at scale and cheaply, fueling a soaring foreign trade surplus.
The Chinese government is also betting big on humanoid robots, with more than 140 Chinese companies currently developing humanoid robots with government subsidies.
So far, these humanoid robots are best known as a showcase for China’s technological ambitions, dancing in formation on TV specials and facing off in promotional boxing matches.
However, some are already being trialled on assembly lines, logistics hubs and scientific laboratories. Developers say that while there is still a long way to go, they are close to matching human productivity for tasks such as handling, sorting, and quality inspection.
All of this is part of a top-down push for China to maintain its competitive advantage in a new era of high technology and rising labor costs, outlined in the government’s “Made in China 2025” plan announced in 2015, the same year the Chinese government decided to scrap its controversial decades-old “one child” population control system.
While the impending population crisis may not have been the driving force behind industrial policy, voices within China are framing automation, robotics, and AI as tools to mitigate its harm.
“The population numbers are starting to go against China, so this idea of automation, and now AI… becomes part of the scenario of, ‘We’re going to increase productivity so much that[population decline]doesn’t matter,'” said Bart Hoffman, a professor at the East Asia Institute at the National University of Singapore and former director of China at the World Bank.
Its official vision includes robots not only as factory workers but also as caregivers for the rapidly growing number of adults over 60, who currently make up 23% of the population but could account for more than half by 2100, according to United Nations projections.
The urgent need to expand systems to care for these elderly is compounded by the legacy of the one-child policy, which created a generation of only children caring for parents without siblings to share the burden.
Recent government guidelines call for advances in humanoid robots and AI technology to enhance elderly care, as well as the development of brain-computer interfaces, robotic exoskeletons and muscle suits to assist elderly people with declining physical function.
State media regularly highlight ambitions to deploy humanoid robots to help care for the elderly around the clock, perhaps in an effort to get more people open to the idea.
Another concern is the state-backed pension system that many older Chinese rely on, which projections suggest could fall into the red as the population ages without further reforms.
Tianzheng Xu, a China analyst at the Economist Intelligence Unit, said the “competition between technological advances and an aging population” could also be involved here.
If technological advances can significantly increase labor productivity, Xu said, in theory each worker will be able to contribute more to the system, even if there are more retirees to support.
“If the former exceeds the latter by a certain margin, it is still possible to sustain the pension system through increased labor productivity.”
But it’s unclear how exactly all this will play out, not just for strained pension systems, but for the economy as a whole, especially in the second half of this century when population decline will deepen significantly.
“In the race to reduce population and increase productivity, China will continue to be far ahead in the race to reduce population and increase productivity until the 2070s, when the decline in the workforce will outpace productivity gains,” Hoffman said, citing projections based on the OECD’s long-term scenario.
Still, it’s hard to say how new technology will fundamentally change work, he added, and “productivity is very likely to surprise us.”
The other side of that coin is how the transition to high technology will impact the workforce. Increasing a country’s productivity does not mean more people getting jobs. It could simply mean fewer people doing more.
China is already facing a double bind of labor shortages in some sectors and unemployment in others. Even if technology improves productivity and stabilizes the economy over time, it may first deepen economic pain.
Estimates vary on how many workers China could lose to AI and robots, but domestic experts estimate the technology could impact about 70% of China’s manufacturing industry. Last month, authorities announced they would roll out a series of policy measures to address the employment impact of the rapid rollout.
“The question of timing is very important. In the long term, automation is part of the solution to workforce decline. In the short to medium term, if not managed properly, we risk discharging workers who do not yet have clear replacement opportunities, which will increase social and political pressure,” He said in Hong Kong.
Managing this will require “serious investment in reskilling and upskilling” so that ordinary workers and technicians can move from repetitive manual work to working with automated systems and higher-value services, he said.
Stronger social protection policies will also be needed to support workers when they change jobs, locations or sectors, or face unemployment, it added.
And overall, experts stress that automation is just one of a range of non-pro-fertility measures that the Chinese government can take to alleviate the economic and social impact of China’s worsening demographic trends.
Philip O’Keeffe, a professor at the Center for Population Aging Research at the University of New South Wales in Australia, said this would include investment in education to give workers better skills, as well as continued pension reform (the retirement age was raised for the first time in 2024) and efforts to keep people in formal jobs longer.
“There is no doubt that ultra-low birth rates will have a major impact on society, but the decline in total population and working-age population will occur over time and will take time to adjust,” he said.
