China’s image as an emerging global superpower masks deep domestic challenges that could undermine its long-term economic prospects, according to leading economists. While the country has lifted hundreds of millions out of poverty in recent decades, it now faces a demographic time bomb and persistent income inequality that paint a more complex picture of its development.
The Hub spoke with Northwestern University economics professor Nancy Qian to better understand how China’s internal struggles could affect its international trajectory in the geopolitical hierarchy.
Here are five key takeaways from the conversation:
- China faces a severe demographic crisis: Fertility rates in China are plummeting from 7.51 children per woman in 1963 to approximately one child today, well below the 2.1 replacement rate needed to maintain population levels.
- Youth unemployment and mental health issues are mounting: As the Chinese youth face intense educational pressure and limited job prospects despite high qualifications, the economic outlook for the country’s youth is uncertain.
- Income inequality remains stark: Rural Chinese citizens are earning a median per capita disposable income of just $2,177 USD compared to $63,589 in the United States.
- China remains a middle-income country: Despite its global influence, China’s per capita GDP was around $8,000 in 2019, placing it between Montenegro and Botswana.
- The country’s future growth will likely be more modest: China is transitioning from rapid development to a more predictable, normalized economic trajectory, which will mean slower growth.
China faces a severe demographic crisis
China’s fertility collapse represents one of the most dramatic demographic shifts in modern history. The country has moved from having one of the world’s highest birth rates to among the lowest in just six decades.
Qian noted that China’s current rate of approximately one child per woman falls far short of the threshold of the replacement rate of 2.1. Unlike countries such as Canada, which compensate for low fertility through immigration, China has not embraced large-scale immigration as a solution.
“There’s less land for agriculture. So the way the Chinese see it is that first they need to reduce the population in China before they even allow immigration in. And so the surprise now is how fast the population is going down,” Qian said.
This demographic shift is already visible in everyday life. Qian described how playgrounds across China now sit largely empty, a stark symbol of the country’s aging population and shrinking youth cohort.
Youth unemployment and mental health issues are mounting
Despite China’s economic growth, young people face significant challenges entering the workforce. High youth unemployment coincides with intense educational pressures that begin early in childhood.
“So the youth unemployment numbers hit a historical peak a few years ago, and it hasn’t really abated that much for the last generation. I would say the last 20 years, there was a sense that if you go to school and you do well in school, then you can get a good job…You get married, you have an apartment, you can have a child, a car,” Qian explained.
“There’s a sense that those jobs are fewer and fewer now, and no matter how hard you work in school, you can’t get the job that you thought you were going to get,” Qian observed, noting that mental health issues, including depression, are becoming increasingly common among Chinese youth.
The pressure to succeed academically and professionally has created a generation struggling with both economic uncertainty and psychological strain.
The situation is compounded by the fact that even highly educated young people struggle to find employment opportunities that match their qualifications and expectations.
Suicide rates for children between the ages of five and 14 have increased more than fivefold since 2010.
Income inequality remains stark
While China has made remarkable progress in poverty reduction, significant income disparities persist, particularly between urban and rural populations. The gap between Chinese and American incomes illustrates the scale of this challenge.
Qian highlighted that rural Chinese citizens have a low median per capita disposable income—just $2,177, compared to $63,589 in the United States. This massive disparity underscores how China’s economic miracle has been unevenly distributed across its population.
“So I am a development economist at heart, which means that I think about poverty and I look at the whole country…The average income of a Chinese person is one-sixth of what it is in the United States,” Qian observed. “And median households have disposable incomes of around $15 per person.”
China’s inequality extends beyond rural-urban divides, creating frustration among citizens who struggle to afford basic necessities despite living in a country often portrayed as increasingly prosperous.
China remains a middle-income country
Despite its global influence and rapid infrastructure development, China’s economic status remains that of a middle-income nation, said Qian. China’s per capita GDP of around $8,000 in 2019 placed it between Montenegro and Botswana.
“I mean, to be precise, 500 million people are living in rural areas. And, you know, they just got indoor plumbing recently. So in that sense, China is very poor,” Qian said. “And China’s big, there’s great inequality. You go into the city centre of Shanghai, where I’m from, you go into the French Concession and you see lines and lines of luxury German cars…”
The country’s future growth will likely be more modest
Qian suggests China’s era of miraculous economic growth is drawing to a close, but will still continue to show respectable growth.
“I have a moderate view. I’m not doom and gloom, and I am not [predicting] China is going to take over the world,” Qian said.
“So these hundreds of millions of people, they have so little compared to many other countries, but they’re really educated and they’re really healthy and they really want to work, they’re very motivated. So there has to be room for growth. So in that sense, I’m an optimist,” Qian explained.”
“And it doesn’t have to grow at 10 percent per year. When China grew at 10 percent per year, we called it a miracle. And everyone thought this was amazing. But…development economists knew that those days would come to an end. No country sustains that forever. And Chinese growth wasn’t a slowdown to something that was more normal for a normal country, 5 percent growth is amazing, 2 percent growth is respectable,” Qian added.
This transition reflects China’s maturation as an economy, but also highlights the constraints that internal challenges place on its global ambitions. The shift toward more modest growth could have significant implications for China’s ability to challenge U.S. global dominance and maintain its current superpower status.
This commentary draws on a Hub podcast. It was edited using AI. Full program here.
