Beijing
 — 

China’s birth rate has hit a historic low – deepening fears of a major economic shock in the decades to come as the country’s massive labor force dwindles and its population of pension-drawing retirees swells.

A flurry of policies from Chinese authorities to spur procreation – from cash handouts and tax breaks to new rules making marriage easier – has so far failed to stop the downward slide, data released last month shows.

But the country is also eyeing another potential fix: robots and automation.

Chinese leader Xi Jinping has for years overseen a push to upgrade and automate the country’s manufacturing sector, part of Beijing’s goal to transform China into a self-sufficient high-tech powerhouse.

That push is now converging with Beijing’s rush to address the rebalancing of its population, which, if unaddressed, threatens to break the pension system, drive up families’ health care costs and crush productivity – dragging down faith in public institutions and economic output in one swoop.

“If (China) just carries on exactly the same as it has been in the last 20 or 30 years, then it’s going to be a massive crisis, because of the mismatch between their population system and their economic system – but why would they do that?” said Stuart Gietel-Basten, a demography expert at the Hong Kong University of Science and Technology.

If handled well, experts say, China’s push into automation and AI – alongside other adaptations – could go a long way to help stop economic growth from falling off a demographic cliff – at least for decades to come.

But managing a high-tech transition – one that would cost people jobs in the short term and change the nature of work in the long term – is a steep challenge for governments around the world. Let alone in a country of 1.4 billion people that built decades of growth on the back of its expansive workforce.

And the stakes are particularly high for a ruling Communist Party that has pegged its legitimacy to economic stability and aims to make China a “mid-level developed country” within the next decade.

How Beijing prepares now will have long-term implications for the global economy and on generations to come, experts say, and that’s not just about trying to arrest falling birth rates.

“If China can achieve sustained gains in labor productivity through robots, digitalization and AI, then it can maintain – or increase – industrial output with fewer workers on the factory floor,” said Guojun He, an economics professor at the University of Hong Kong.

That means “automation can significantly mitigate, but not completely neutralize, the economic impact of a shrinking workforce, especially in industrial production.” But those impacts will be different across industries – and require a “combination of policies” from education to social security to land well, he added.

China is already by far the world’s largest industrial robot market and home to more than half of all robots installed worldwide in 2024, according to the International Federation of Robotics.

Across the country, robotic arms work in concert to weld, paint and assemble goods in highly automated lines, or even in “dark” factories, where there’s no need to waste electricity keeping on the lights for human eyes.

High levels of automation are what’s enabling Chinese factories to pump out cutting-edge electric vehicles and solar panels at large scale and low prices – driving their soaring trade surplus with the rest of the world.

Beijing is also betting heavily on humanoid robots, with more than 140 companies in China now developing them in a field flush with government subsidies.

So far, these humanoids are most visible as showpieces of China’s tech ambitions, dancing in formation on televised specials and duking it out at promotional boxing matches.

But some have already been piloted on assembly lines, in logistics hubs and in science labs. Their developers say they are still a ways off, but getting closer to matching human productivity in tasks like handling, sorting, and quality inspection.

All this is part of a top-down push to ensure China keeps its competitive advantage in a new era of high tech and rising labor costs, outlined in the government’s “Made in China 2025” plan released in 2015 – the same year Beijing decided to scrap its controversial, decades-long “one-child” population control regime.

While the looming population crunch may not have been the driving force behind the industrial policy, voices within China have framed automation, robotics and AI as tools to mitigate its harms.

“Since the population numbers are starting to turn against China, this idea of automation, and now AI … has become part of the script of … ‘We’re going to have all this productivity increase and therefore (population decline) won’t matter,’” said Bert Hofman, a professor at the East Asian Institute at the National University Singapore and former World Bank country director for China.

That official vision includes robots not just as factory workers, but as caregivers to the burgeoning population of adults over 60, who now make up 23% of the population but could account for more than half by 2100, per United Nations projections.

The urgent need to expand systems to care for those aging adults is compounded by the legacy of the “one-child” policy, which created a generation of only children who will care for parents without siblings to share the burden.

Recent government guidelines have called for advancing humanoid robots and AI technologies to enhance elder care, as well as developing brain-computer interfaces, exoskeleton robots and muscle suits to assist elderly citizens with declining physical functions.

State media regularly highlights ambitions of rolling out humanoid robots to help older adults with around-the-clock caregiving – perhaps a bid to make more people open to the idea.

Another concern is the state-backed pension system, which many elderly Chinese rely on and predictions suggest could move into deficit as the population ages without more reform.

Here too, the “race between technology advancement and population aging,” could have a bearing, according to Tianzeng Xu, a China analyst with the Economist Intelligence Unit.

If tech progress can significantly boost labor productivity then, in theory, each worker would be able to contribute more to the system even when there are more retirees to support, Xu said.

“Provided the former outpaces the latter by certain margins, the improvement of labor productivity is still possible to keep our pension system afloat.”

But it’s uncertain how exactly all that will play out, not just for a strained pension system, but the economy at large – especially in the latter half of the century when the demographic decline deepens considerably.

“In this race between population decline and productivity increase, China (stays) well ahead until the 2070s when labor force decline is going to be more rapid than productivity increase,” said Hofman, citing projections based on OECD long-term scenarios.

Even still, he added, it’s hard to say how fundamentally new technologies will change work – and “productivity may very well surprise us.”

The other side of that coin is how the high-tech transition will affect the workforce, as making a country more productive doesn’t mean that more people have jobs; it could just mean fewer people do more.

China is already facing a double bind of labor shortages in some sectors and unemployment in others. Even if tech-boosted productivity can stabilize the economy over time, it could first deepen that economic pain.

Estimates for how many workers could be displaced by AI and robots in China vary, but domestic experts have estimated that this tech could affect around 70% of China’s manufacturing sector. Last month, officials said they would roll out a set of policy measures to address the impact of its rapid adoption on jobs.

“The timing issue is very important – in the long term, automation is part of the solution to a smaller workforce. In the short-to-medium term, if not managed well, it risks displacing workers who do not yet have clear alternative opportunities, adding to social and political pressures,” said He in Hong Kong.

Managing this requires a “serious investment in reskilling and upskilling,” so that ordinary workers and technicians can move from repetitive manual work to working with automated systems or moving into higher-value services, he said.

It will also require stronger social security policies to support workers as they change jobs, locations or sectors or face unemployment, He added.

And overall, experts stress automation is just one part of a range of measures besides pro-birth policies that Beijing can take to mitigate the economic and social impact of the deepening demographic shift.

Along with investing in education to give workers better skills, those also include continuing to reform the pension system (which saw the retirement age raised for the first time in 2024) and efforts to keep people in formal work longer, according Philip O’Keefe, a professor at the Centre for Population Ageing Research at Australia’s University of New South Wales.

“While no doubt the very low birth rate will have big implications for society, the decline in total and working age population will happen over time, with time to adjust,” he said.