Teetering Population Pyramid in Rural China

China's countryside is gradually turning into a warehouse for the country's aging population and the working-age population shrinks. 

The "population pyramid" for China's countryside in 2020 has a hollowed-out base with relatively few people at peak working ages of 15-49. The largest cohort of rural people in 2020 were aged 50-54, with 24 million women and 25 million men in this age group. By contrast there were only 11 million males and 8 million females aged 15-19 in rural China during 2020. 

Calculated from China's 2020 population census.

Back in 2000, the rural population pyramid had a thicker base of working age people. Folks age 50-54 in 2020 (a baby boom born in the late '60s to make up for the starvation after Mao's "great leap forward") were aged 30-34--at peak working age. There were so many rural people at working age then that underemployment in the countryside was a major concern in the early 2000s. That cohort was also at peak child-bearing years in 2000, and they had produced a baby boom "echo" of kids aged 10-14 in 2000. In the late 1990s it was urgent to get into the WTO in order to jump start the economy and create jobs to absorb the huge rural population. On the supply side, the seemingly bottomless supply of young rural people looking for jobs was a major factor that powered the fantastic growth of the Chinese economy during the first decade of the 2000s.

Calculated from China's 2000 population census.

WTO accession succeeded in solving the rural underemployment crisis, but it hollowed out the rural population structure, leaving mainly old folks and children behind. 

Younger folks are more likely to migrate out of the countryside than are older folks. Thus, when children reach working ages they tend to disappear from the rural population.

The big cohort of rural kids in 2000 disappeared from the rural population as they reached peak working age. In 2000 there were 46 million rural boys aged 10-14 years old. By 2010, these boys were men aged 20-24, and only 28 million members of this cohort were still living in the countryside. By 2020, this cohort was aged 30-34, and only 19 million were still in the countryside. Thus, only 40 percent of the 10-14-year-old boys from 2020 were still in the countryside twenty years later. The rest either migrated to urban jobs (or were lost through statistical inflation/deflation.) The number of females in that cohort dropped from 43 million to 16 million, a 63-percent drop.

The chart follows the population of rural cohorts born during 1986-90 over China's censuses of 2000, 2010, and 2020. 

The consequence is the big hole in the rural population for folks at peak working ages in 2020. This is evident by overlaying the 2000 and 2020 population pyramids. The population of rural people at ages of 50 or more has grown from 157 million to 211 million over two decades while the population of working-age people ages 20-49 years old has fallen by half from 366 million to 181 million. The number of rural kids under age 20 has also plummeted from 261 million to 118 million.

The role of the countryside in the Chinese economy is now fundamentally changing. Traditionally, the countryside was a reservoir of labor that could be called forth to support booms and sent back to the countryside to return to subsistence farming during slow periods. Rural people were expected to farm and feed themselves with a small surplus to feed city people. Now the countryside is turning into a giant home for the aged. According to the 2020 census, 121 million people ages 65 and older lived in China's countryside--46 percent of China's elderly population. 

China's cities have a lot of elderly people too, but the economic and fiscal divide between city and countryside presents a serious challenge for supporting the rural elderly. Many of the elderly still engage in subsistence farming but this cannot provide a satisfactory standard of living. Chinese agricultural leaders are desperate to mechanize and scale up farming as they watch the agricultural labor force age and shrink. Their vision is for aging subsistence farmers to become surreptitiously shoved off the land by making them shareholders in phony farm cooperatives that often generate little or no dividends.

It's going to get worse. Note that rural China had 35 million 10-to-14-year-olds in 2020, down from nearly 90 million in 2000. Most of those 35 million 10-14-year-olds will disappear from the rural population over the next two decades.

China's leaders have long relied on Confucian respect for the elderly and family ties to motivate working-age migrants to send remittances to their aged parents in villages on their own initiative. What happens when the informal remittance system breaks down as migrants become more accustomed to city life where citizens are told to rely on the government for support? It also breaks down when migrants lose their jobs, face astronomical living costs and school fees, or lose savings in real estate crashes and financial meltdowns. 

A rudimentary old age and health insurance system has been set up in the countryside but the payments are much too small to provide a decent standard of living. Most of China's financial assets are in cities and there is no functioning mechanism to transfer funds to aging rural people. Rural government have no tax base to support rural elderly. Taxes on farmers were eliminated in the 2000s and now rural governments are responsible for handing out a growing menu of subsidies. They relied on selling off land for development projects to generate revenue but that golden goose has stopped laying eggs. Xi Jinping advocates creating agricultural industrial chains to bring prosperity to the countryside, but the dirty secret is that most of the value added in agricultural industrial chains is created in cities. Agricultural processing is a highly capital intensive industry that creates few jobs. 

Don't Worry about Food Imports (unless we tell you to)

"There's no need to worry about the increase in imported agricultural products," Chinese State media said earlier this month. The Economic Daily article assured readers that "the expansion of agricultural imports is not a bad thing in itself." It needs to be analyzed, authors said. 

This endorsement of food imports by the Communist Party-run Economic Daily appears to be an Orwellian reversal of food security propaganda. It was posted on dozens of Chinese web sites, a sure sign that it is official Chinese communist party propaganda, not the product of a rogue commentator. 

Economic Daily authors said that "some people" have baseless worries that "China will be controlled by others if it imports food" and that "foreign low-priced agricultural products will impact the domestic industry." To prove their point, Economic Daily authors pointed out that "these situations have never occurred in over 20 years since entering the WTO." They noted that imports are still a very small portion of China's grain supply and assured readers that the State pays great attention to stabilizing the market and protecting farmers' interests. Economic Daily also insisted that imports of ag commodities have not prevented the development of China's food grain and the country must be prepared to compete in international agricultural markets--rhetoric that has never appeared in China food security articles.

Less than 3 months earlier Economic Daily itself was among the "some people" peddling these worries. Two of the phrases they now dismiss appeared in a May 17, 2023 Economic Daily article, "Effectively maintain the security of the food industry" which warned that "[China] could easily be controlled by others" [italics added] if it continues relying on imports of grains. The May article also warned that low-priced imports could pressure the domestic grain market, weaken farmers' production incentives, and shake grain industry security."

The August article also appears to undermine a rhetorical underpinning of Xi Jinping's food security dogma. A similar phrase warning about "being controlled by others" has been quoted dozens of times to explain Xi's food security directive to "keep China's food bowl firmly in our own hands at all times":

"If [supplies of] staple food rely on imports, other people could lead us around by the nose" (如果口粮依赖进口，我们就会被别人牵着鼻子走). 

This phrase was featured in a 2021 article on Xi Jinping's "food security story," and it has appeared as recently as a March 2023 "Seeking Truth" article explaining Xi's food security mandate, in an April 2023 essay on becoming an agricultural powerhouse, and an article last month on the Ministry of Education web site. So Xi Jinping is among the "some people" who worry unnecessarily about food imports. 

Economic Daily cited Chinese customs data that said imports of agricultural products for the first half of 2023 totaled 855.5 billion yuan, up 16.2% from last year. Agricultural imports were more than twice as large as agricultural exports (328.5 billion yuan, up 8.9%) in the first half of 2023. Economic Daily described the faster growth of agricultural imports compared with exports as "a major feature of agricultural trade." 

China customs administration data for 2022--a year plagued by COVID lockdowns--reported agricultural imports for the whole year were valued at $220 billion, up 7.4 percent from 2021.

China's customs administration has now released data showing agricultural imports for January-July valued in Chinese yuan were up 12.8 percent from last year. Data reported in U.S. dollars are roughly the same as last year. (With the Chinese currency falling in value China now has to spend more domestic currency to buy the same amount of imports priced in dollars.) 

According to China customs, soybean imports in July 2023 reached 9.7 million metric tons, up 15% from last July. Soybean imports for the first 7 months of 2023 reached 62.3 million metric tons, up 15% from last year--despite hysterical rhetoric last year instructing farmers to grow more soybeans and claiming that feed mills are reducing soybean meal use in animal feed. China's meat imports for January-July 2023 totaled 4.1 million metric tons, up 9.5% from last year. Edible oil imports for January-July 2023 totaled 2.4 million metric tons, up 119% from last year. Imports of fruits and nuts--discretionary food items--were nearly 5 million metric tons, down 2%.

Economic Daily pointed out that China's status as the largest agricultural importing country means that China is playing an important role in international agricultural markets. Economic Daily explained that moderate imports of grain are part of the national food security policy and that imports of resource-intensive products allow China to conserve land and meet peoples' needs for a good life. 

Economic Daily saves the warnings about dangers of importing food for the end of the article, warning that China's imports are supplied by just a few countries and a handful of multinational grain traders, and the external environment is becoming more and more complex with the exports of some countries facing uncertainties. In extreme cases, the problem of "not being able to buy" must also be considered, the Economic Daily authors warned.

Why the sudden endorsement of food imports? 

Officials may see signs of collapsing food production they're not revealing to the public. This year officials suddenly became much more aggressive in ordering farmers and rural officials to plow up orchards, parks, and mountainsides to plant grain crops; sending out a cadre of rural enforcement teams to make sure the job got done; and arresting grain officials who looted grain reserves. Perhaps now officials have realized the strategy is not going to solve the food problem this year, especially after flooding destroyed an unknown portion of this summer's wheat harvest and flooding from this month's typhoons is damaging fall crops. Seeing a mounting shortage of food this year, officials may have changed course to soften up their rhetoric and get the population used to imports. 

Softening the rhetoric on food imports may be an attempt to head off criticism for failing to keep promises to guarantee the food supply. Officials may see that they are on the brink of losing public support given the flagging economy, alarming statistics on plummeting fertility rates, a youth unemployment crisis and looming financial meltdown. They are likely fearful of the common people pointing to surging food imports as a sign that the regime has lost the "mandate of heaven."

Deflation in China's Agricultural Prices

There's much chatter about China falling into deflation after its July 2023 CPI report showed a -0.3 percent year-on-year decline. The food and beverage component of CPI showed a -0.5 percent year-on-year decrease that reflected mainly a crash in meat prices--especially a 26 percent decrease in pork prices from a year ago. Meanwhile, China's Q2 2023 index of farm prices (most recent available) showed a tiny -0.4 percent decrease from last year.

Looking at prices of individual commodities from China's grain bureau, ag ministry, and rural market prices shows a falling trend or plateau for many commodities that began early in 2023 as the post-COVID-lockdown recovery narrative began to vaporize. Signs of deflation are surprisingly evident in Chinese ag prices, despite farmers abandoning land, floods, and downward pressure from surging imports. 

Chinese soybeans are a clear example. Xi Jinping ordered an increase in soybean production last year to reduce reliance on imported beans as a major national security initiative. Statisticians reported a record 20-million-ton harvest, but it glutted the market. Average soybean procurement prices reported by China's Administration of Grain and Commodity Reserves were strong until September 2023 when the new Chinese harvest came online. Then prices immediately began to plummet, an the slide continued throughout the marketing year except for a brief bump in March-April when purchases for reserves briefly elevated prices. The July 2023 domestic Chinese soybean procurement price was down 15 percent from a year earlier. These prices tell a more pessimistic story than China's official farm price index which showed a small 2-percent decrease in soybean prices as of Q2 2023. Meanwhile, China's soybean imports are up 15 percent so far this year, with 9.7 million tons imported in July 2023 alone.

Chinese corn prices rose after the 2022 Russia invasion of Ukraine and increased some more in the first months after the 2022 harvest until reaching a peak in December 2022. Then weakness set in for Chinese corn prices in December. Chinese corn prices softened during 2023 and are now very close to their year-earlier level.  

Chinese wheat prices also showed a clear bump in 2022 after the invasion of Ukraine. Like corn prices, wheat prices began dropping early in 2023. The fall in wheat prices ended abruptly in May 2023 as heavy rains damaged the new winter wheat crop in some key production areas of China. The rebound in wheat prices over the summer has been barely perceptible. July 2023 wheat prices were down 8.5 percent from year-earlier levels.

Chinese hog prices were on the way up a year ago, but they peaked in October 2022 and fell sharply late in the year as a surplus of hogs was dumped into a weaker-than-expected market. Prices deteriorated further in 2023. July hog prices were down 32 percent from a year earlier.

China's beef prices peaked in January 2023 and fell at an accelerating rate from January to July. July wholesale beef prices were down 6.7 percent from a year earlier. 

China's raw milk prices have also been in freefall during 2023. July raw milk prices were down 8.8 percent from a year earlier.

Fish also shows some weakness. Grass carp prices in rural markets fell sharply early in 2023 before rebounding slightly by July. The July 2023 grass carp price was down 5.5 percent from a year earlier. 

Rice is an exception, with prices up slightly from a year earlier. Long grain prices are mostly flat, despite all the turbulence in the global market. Medium grain prices have turned up very slightly with the most recent flooding having hit rice-producing areas in the northeast.

This is not an exhaustive analysis of agricultural prices in China, but it's enough to demonstrate that downward pressure from weak demand is evident in this sector of China's sputtering economy.