China's Demographic Decline Raises Conflict Risk with US and Taiwan

The conventional wisdom, often associated with Thucydides's Trap, suggests that war between a rising power (China) and a declining power (US) is inevitable. However, a new perspective argues that the decline of China itself makes a collision with the US almost certain. Economic data emerging from China supports this view, indicating that a declining China could be more dangerous than a rising one.

China's Demographic Crisis

For 70 years, China's population steadily increased. However, in 2022, it began to fall for the first time since the 1960s famine. This demographic shift is critical because it means China will have fewer workers, taxpayers, consumers, and young people to support its ambitions each year. A rising power can afford to wait, but a declining one cannot. The Chinese Communist Party (CCP) recognizes that its window of opportunity is closing, understanding that the China of 10 years from now will be older, smaller, and weaker. This urgency may compel Beijing to act on its intentions sooner rather than later.

Military Preparations for Taiwan

Evidence of this urgency can be seen in China's military preparations. Deep in the Chinese desert, within Asia's largest military complex, China has constructed a full-size replica of Taiwan's capital, Taipei. This includes a building almost identical to Taiwan's presidential office. Chinese state television even broadcast footage in 2015 of soldiers storming this mock building.

Analysts studying these images believe China is practicing a "decapitation strike," an operation aimed at killing or capturing a country's leadership in the initial hours of a conflict. In 2024, a second replica of the same government district was found hundreds of kilometers away. China has also built a full-size mockup of a Taiwanese naval base, complete with a destroyer-shaped target that was hit by a missile. Furthermore, outlines of an American aircraft carrier and a replica of the US Navy's main base in Japan have been laid out. These actions suggest China is meticulously preparing to hit every necessary target in the event of a war for Taiwan. Beijing dismisses these as "routine drills," but the scale and specificity of these preparations are alarming.

The Legacy of the One-Child Policy

The root of China's demographic decline lies in its one-child policy, implemented for 35 years. This aggressive population control program involved forced sterilizations, mandatory abortions, and crippling fines. While effective in curbing population growth, it created a demographic imbalance.

The authoritarian nature of the CCP allowed such policies to be enforced, but it also created a system where incentives led to distortions. Local officials were incentivized to over-report population figures to secure resources, and the government had reasons to underreport population decline on the global stage to avoid appearing weak. This led to a misperception of continuous growth, even as the population began to soften.

When the CCP realized the severity of the demographic decline, it reversed course, encouraging families to have more children through incentives like cash for babies, longer maternity leave, tax breaks, and housing subsidies. However, these efforts have largely failed.

Why Chinese Families Aren't Having More Children

The primary reason for the continued low birth rate is economic. Raising a child to age 18 in China costs approximately seven times the average annual income, one of the highest ratios globally, and this excludes university expenses. High housing costs in major cities like Shanghai and Beijing, coupled with an intensely competitive education system, make raising children prohibitively expensive. The education system, centered around the single, life-determining Gaokao exam at age 18, forces parents to invest heavily in private tutoring, creating an "education arms race." Even government bans on private tutoring in 2021 have not alleviated the financial burden.

Beyond economic factors, a fundamental mathematical reality makes a reversal difficult. The number of babies a country can have is limited by the number of women of childbearing age (roughly 20-34). China currently has about 105 million such women, but this number is projected to drop to around 58 million by 2050. This decline is irreversible because these women either already exist or do not.

The Impact of Educating Women on Birth Rates

A significant, often overlooked, factor contributing to declining birth rates in developed nations, including China, is the education of women. While educating women is overwhelmingly positive, it has a knock-on effect: it provides women with more options and interests beyond childbearing. Combined with access to birth control, this allows women to pursue careers, personal fulfillment, and other life goals, leading to a natural decline in birth rates.

In societies where women are denied education and options, as seen in some fundamentalist regions, birth rates tend to remain high. This is because childbearing becomes a primary source of meaning and purpose. China, by educating its female populace and providing access to birth control, has inadvertently created the conditions for its current birth rate problem. Reversing this trend would require reversing these societal advancements, which is undesirable.

Economic Consequences of Decline

China's demographic decline has profound economic implications. The country built an industrial capacity to supply an ever-expanding global market, but its domestic market is now shrinking due to fewer young consumers. This leads to China "dumping" its surplus goods on the rest of the world at prices that domestic industries cannot match, causing manufacturing problems and economic strain in other countries.

Furthermore, China controls the refining of 19 out of 20 strategic minerals, holding around 70% of the global market. For critical materials like gallium and germanium, used in cars, phones, military radar, and satellites, China refines about 98% of the world's supply. A declining China has begun to weaponize this control, imposing export restrictions and dramatically increasing prices for these materials outside its borders. This move contributes to deglobalization as other nations seek to build their own supply chains.

For 30 years, China was a major engine of the global economy, consuming vast amounts of steel, iron ore, and concrete. Its construction boom, which included building "ghost cities" with millions of empty homes, was driven by incentives for local officials to meet growth targets, regardless of actual demand. Now, with its population declining and demand peaking, China's reduced consumption impacts countries like Australia, Brazil, and Germany that relied on selling to it.

China cannot simply spend its way out of this crisis. Its national pension fund is projected to run dry by 2035, a problem similar to those faced by other nations with "Ponzi scheme" social security structures that rely on a growing young population.

The Global Context of Population Decline

The issue of population decline is not unique to China. More than half of all countries are already below the birth rate needed to replace themselves, and projections indicate that by the end of the century, 97% of countries will face this challenge. There is no known easy way to reverse this trend without significant societal shifts.

The Danger of a Peaking Power

History shows that the most dangerous power is often not a rising one, but a peaking one that senses its window of opportunity closing. Examples include Imperial Germany in 1914, Imperial Japan in the 1930s, and Russia in 2022.

• Imperial Germany (1914): German leaders, seeing Russia's rapid industrialization and military expansion, feared that by 1917, Russia's military capacity would permanently eclipse Germany's. This "closing window theory" led them to believe a preventive war was necessary to defeat the enemy while they still had a chance of victory, contributing to the outbreak of World War I.
• Imperial Japan (1930s-1941): Japan, a dominant regional power, was heavily reliant on Western resources, particularly US oil. When the US, UK, and Netherlands imposed a total oil embargo in August 1941, Japan's military calculated it had only 18-24 months of oil reserves. Facing economic suffocation, Japan adopted a "now or never" mentality, leading to the attack on Pearl Harbor.

China is currently entering a similar moment. Its ambition to unify Taiwan, an island that produces over 90% of the world's most advanced computer chips, is a critical territorial goal. American commanders have noted that China's leader has ordered his military to be ready for an invasion by 2027. The combination of China's demographic and economic decline, coupled with its authoritarian nature and historical precedents, suggests that a desperate, peaking China could be a significant threat to global stability.