The decline, once it starts to take hold, will dramatically reduce the Communist government’s ability to project global power. The working-age population — people between 18 and 65 — is already shrinking. This decline will become more dramatic in the next 10 to 15 years, sharply reducing China’s economy. A rise in the number of older people reliant on state or family support will also force a reallocation of resources toward consumption rather than investment, the military or foreign influence-buying. That could curtail China’s ability to project power globally 20 to 30 years from now.
There are only two ways out of this trap. One is to significantly increase the number of children — something the government is scrambling to achieve. The other is ominous: secure resources and power abroad now to support the Chinese population later.
This latter course would allow China’s Communist rulers to reap the gains of trade for itself, either through direct control of regions or, more likely, by making countries economically dependent on Chinese firms. In the dependency scenario, workers in the underdeveloped world would supply the labor for Chinese firms, whose profits would then be taxed or shared with the government to maintain its domestic spending and its foreign expansion.
Chinese behavior in recent years is somewhat consistent with this approach. Chinese firms are rapidly investing in the energy and telecommunications sectors in the developed and underdeveloped world, while also increasingly focusing on poorer nations in Asia and Africa. Its “Made in China 2025” strategy openly declares the government’s intention to dominate the technologies for high-value manufacturing and computing in the coming years. If it were to do that, and if its current investments also produce political and economic dependency, it would be relatively easy for Chinese firms to shift actual manufacturing offshore to compensate for the decline in the Chinese labor force.
The same impulse for rapid economic expansion and consolidation applies to China’s military objectives as well. Beijing has long stated its intention to bring Taiwan back under its control. China has been building its military strength in the region across from Taiwan, and many war game simulations suggest the United States would not be able to repel a Chinese invasion — or perhaps not even try, despite the blow that would mean for U.S. influence. If the window for retaking Taiwan would close in the next decade — as China’s population declines and the United States recovers from the pandemic — Chinese President Xi Jinping could easily decide to strike while he still can.
China’s military objectives are far from limited to its nearby neighbors. It has become increasingly reliant on natural gas imports for its energy needs. It currently imports most of its gas from Australia and Turkmenistan, but Australia’s status as a staunch U.S. ally makes that source potentially unreliable. That means finding friendly governments elsewhere to supply its needs, which in turn makes an interest in the Persian Gulf unavoidable.
The world’s largest exporter of natural gas, Qatar, is already the third-largest supplier to China and is increasing bilateral ties. Iran, with massive reserves, desperately wants to expand its natural gas liquefaction capabilities, but Western sanctions have hampered that effort. China could step into the gap, but it currently lacks the military means to protect its investments from U.S. interference. Hence the rumors it is trying to procure a permanent military base in Iran to complement its naval base in nearby Djibouti. Combined with the rapid creation of aircraft carrier task forces that could compete with U.S. forces, China’s need for rapid overseas expansion could place it in conflict with the United States by the end of the decade.
Demography is not destiny, but it does create inescapable pressures. In China’s case, falling population will force it either to curtail or rapidly intensify its expansion of global power. The United States should bet on the latter, and prepare accordingly.
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