‘Strategic rival’ or ‘paper dragon’? China is both

The Financial Times crawled out on a limb last Wednesday with a report that the latest Chinese census, completed in December but not yet published, will show that China’s population declined last year.

If true, that would be a big deal. China hasn’t reported a year-on-year drop in population since the early 1960s, when the famines induced by Mao Zedong’s disastrous “Great Leap Forward” killed tens of millions of people.

Demographers have long warned that, as China modernizes, its population is destined to decline. But, as Grady notes here, the consensus is (or was, at least) that China would keep adding people for another decade.

If, instead, China hit peak population in 2019, the implications are potentially profound. To maintain projected growth rates, preserve savings, and keep seniors from imposing crushing financial burdens on younger workers, China would have to achieve spectacular improvements in productivity, or adopt controversial measures like raising the retirement age or scaling back social welfare benefits.

The FT report, citing “people familiar with the research,” said the census will show that China’s population shrank to less than 1.4 billion in 2020, a reversal that “would suggest that China’s population could soon be exceeded by India’s, which is estimated at 1.38 billion.”

On Thursday, China’s National Bureau of Statistics dismissed the FT report with a one-line statement: “According to our understanding, in 2020, our country’s population continued to grow.”

The NBS promised detailed data would be forthcoming but didn’t elaborate. The 2020 census is a once-in-a-decade effort to analyze demographic shifts in greater depth than annual surveys. It was supposed to be released in April. The FT is standing by its story.

In The Atlantic, staff writer David Frum seized on news of the “suspiciously delayed Chinese census” as evidence for his argument that Americans, including President Joe Biden, wildly overestimate China as an economic and strategic rival. “Whatever the census ultimately claims, and regardless of whether it is believed,” Frum wrote, “the [FT] story points to two deep truths about Chinese society: It’s about to be home to a lot of old people, and trust in the state is very low, and for good reason.”

Frum, drawing heavily on research by Tufts University professor Michael Beckley, lists a host of reasons China should be considered a “paper dragon,” not a strategic rival.

Among them: China’s pilots fly fewer hours than U.S. pilots; Chinese soldiers have to spend 20% of their time studying communist ideology; 76% of China’s working age population hasn’t completed high school; Chinese universities are rife with fraud; Chinese firms spend a fraction of what their U.S. counterparts do on research and development; more than a fifth of Chinese housing stock is empty; more than a third of the richest Chinese would emigrate if they could.

Frum, channelling Beckley, warns that Americans overlook China’s myriad weaknesses because they pay way too much attention to the size of its gross domestic product: “China may well surpass the United States as the largest economy on Earth by the 2030s,” he writes. “China was also almost certainly the largest economy on Earth in the 1830s. A big GDP did not make China a superpower then—and it will not make China a superpower now.”

Northwestern University professor Nancy Qian makes a similar point in a recent essay on The Wire China. Her search through all English news outlets in the ProQuest database between 2011 and 2021 found that nearly 21,000 discussed China’s GDP while fewer than 1,200 mentioned GDP per capita.

That’s important, she says, because the different measures “paint significantly different pictures of China’s economic and political situation.”

In 2019, China’s GDP of $14 trillion ranked second only to that of the U.S., with $21 trillion. By contrast, China’s per capita GDP was $8,242, placing the country between Montenegro ($8,591) and Botswana ($8,093). Even if measured in purchasing power parity (PPP) terms—with income adjusted to account for the cost of living—China’s per capita GDP was $16,804 in 2019—below the global average of $17,811 and only 86th in the world, between Suriname ($17,256) and Bosnia and Herzegovina ($16,289). U.S. GDP per capita in PPP terms was $65,298.

China abounds with such contradictions. It is huge and growing—and also poor. It is run by autocrats who regard entrepreneurs with suspicion—and is home to some of the world’s most innovative tech companies. And its population may well be shrinking much sooner and faster than we know. But I’m with Financial Times‘ Gideon Rachman who argues in his latest column that “lousy demographics will not stop China’s rise.”

More Eastworld news below.

Clay Chandler
– clay.chandler@fortune.com

This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at eamon.barrett@fortune.com


Middle and Down

Canberra said it was reviewing the Chinese ownership of Australia’s Port Darwin, threatening to cancel a 99-year lease signed with Shandong-based Landbridge Group in 2015. Port Darwin has been used as a base for U.S. Marines since 2011. The review adds to strained relations between the Middle Kingdom and Down Under, coming weeks after Australia cancelled two infrastructure projects booked under China’s Belt and Road Initiative. Meanwhile, New Zealand Prime Minister Jacinda Ardern said last week differences between Wellington and Beijing are “becoming harder to reconcile,” although she didn’t say reconciliation was impossible. The Guardian

F’ign affairs

Philippines Foreign Affairs Secretary Teodoro Locsin told China to “get the fuck out” in a tweet on Monday, chastising Beijing for its actions in the South China Sea. A small flotilla of Chinese ships has been anchored off of disputed Whitsun Reef, roughly 600 miles south of Hong Kong, since March. The Philippines has lodged 78 diplomatic protests with China since President Rodrigo Duterte came to power in 2016, but Duterte has recently sought warmer ties with Beijing. Last month Duterte said the flotilla in Whitsun is not an issue so long as it is only fishing. Reuters

WHO says

The World Health Organization will decide in the coming days whether to approve China’s Sinopharm and Sinovac vaccines for distribution through the international agency’s COVAX scheme. None of China’s vaccine makers have published phase three trial data in peer-reviewed journals, but the WHO published its assessment of data on Sinopharm and Sinovac efficacy this week. An approval would help China’s homegrown vaccines gain recognition on the global stage and ease the strain on Western producers that are currently sole suppliers for COVAX. SMH

Worker drones

Japanese infrastructure companies, including Nippon Telegraph and Telephone (NTT), are considering replacing Chinese drones with own-brand ones, citing security risks. NTT currently deploys drones developed by Shenzhen-based DJI to survey and conduct maintenance work on some of its telephone lines. But Nikkei reports NTT will swap out its Chinese drone fleet with domestic ones. A new NTT subsidiary also began producing its own drones last December. Nikkei

Korea inflation

South Korea’s inflation accelerated in April to its fastest growth rate since 2017, rising to 2.3% from 1.5% in March. Economists polled by Bloomberg had expected April’s inflation rate to come in at 2.1%. South Korean exports in April experienced the highest annual increase in ten years, increasing 41.1% over last year. Bloomberg

Ringing off

Norway's Telenor has written off the value of its $783 million telecom business in Myanmar, due to the "irregular, uncertain, and deeply concerning situation." Myanmar's junta has shut down national Internet and mobile service frequently since the military seized control in a coup on Feb. 1. Telenor will continue to operate in Myanmar, for now, but has removed the Burmese unit from the company's 2021 outlook. The write-off left Telenor with a $470 million loss for the first quarter. Reuters


Nintendo — Games console maker Nintendo will boost production of its Switch console to 30 million units this year, due to increased demand from stay-at-home orders worldwide. Since launching in 2017, the Switch has sold roughly 80 million units as of the end of 2020.

Zomato — Indian food delivery unicorn Zomato has filed for an IPO, hoping to raise $1.1 billion through a placement on both India’s National Stock Exchange and the Bombay Stock Exchange.

Gojek — Gojek has committed to making every vehicle in its fleet of delivery and taxi drivers electric by 2030. However, the onus will be on Gojek’s 2 million drivers to make the change. Gojek says it might help with financing the switch by entering into leasing agreements with its drivers.

Asahi — Japanese brewer Asahi is pushing into non-alcoholic beer, as a new class of health-conscious consumer emerges from the COVID-19 pandemic.

TikTok — TikTok named Shouzi Chew, the parent company Bytedance’s chief financial officer, as the short-video app’s new CEO. Chew will retain his position at Bytedance, which he entered only last month. TikTok’s Vanessa Pappas, who was serving as interim CEO, has been moved to the role of COO.

Hyundai — Korean automaker Hyundai sold 77,523 units in April, up 128% from the year before. Global COO Jose Munoz attributed Hyundai’s success to the fact that the automaker continued to order chipsets last year, while many others cut orders.



The U.S. embassy in Beijing resumed issuing visas for Chinese students traveling to U.S. universities today. Bookings for applications opened online last week, inundating the embassy with 3,000 requests within the first hour. Over 1,000 staff have been deployed to conduct in-person interviews with visa applicants with the embassy anticipating it can process 2,000 appointments a day by mid-May. President Joe Biden lifted COVID-era travel restrictions that had prevented Chinese students from traveling to the U.S. just last week.

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