Tale of Two (Types of) Cities: Demographic Divergence in Urban China

Released on the heels of each other, both the United States’ and China’s 2020 census showed that each country’s population had barely grown over the last decade. For China, one of the notable findings is that the working-age population—those between 15 to 59 years old—has declined by more than 40 million.

Unsurprisingly, many fixated on this figure as underscoring the China “getting old before it gets rich” problem. But by disaggregating the headline data and examining city-level developments, the census actually reflects a more complex story of demographic trends over the last decade.

That story is the divergence of the fates of urban China, which will have profound implications for China’s economic performance, fiscal policy, and governance. To put it simply, there is roughly a 25/75 ratio of growth cities vs. shrinking cities—the former being those that have seen a net inflow of working-age population and the latter being those that have seen a net outflow of working-age population.

Since 2010, just 85 out of 363 cities—including all prefecture-level and county-level cities directly managed by the provincial government—have been growth cities. When zooming in to the 204 cities with a population of at least one million, about a quarter of them (53 cities) experienced positive labor force growth.

Conversely, this means more than 60% of China’s total urban population lives in shrinking cities. A decade from now, even assuming that some people will leave for growth cities, more than 600 million Chinese citizens will still live in shrinking cities.

The regional distribution of growth and shrinking cities is also quite clear. Of the 28 cities that have seen the greatest population growth—more than 10% over the past decade—12 of them are concentrated in the Yangtze River Delta and the Greater Bay Area. In fact, these two regions account for about one-third of the 53 growth cities.

Figure 1. Growth Cities Are Concentrated in Two Coastal Regions

Source: 6th and 7th Population Census and author.

Beyond those two regions, the remaining two-thirds of growth cities are provincial capitals. This is of course a legacy of the Chinese government’s urban bias that saw provincial capitals showered with resources and financing, facilitating intra-provincial movement of population into those cities.

Somewhat surprising is the apparent turnaround of Guizhou province. Historically home to shrinking cities, the province’s recent economic development has managed to attract nearly two million returnees, with eight prefecture-level cities experiencing labor force growth in the past decade. It is possible that part of this has been driven by Guizhou’s rise in political power in recent years.

Moreover, the two “superstar” cities that are supposed to be the most innovative and dynamic also happen to be the most closed ones. Beijing and Shanghai have both experienced nearly a 10-percentage points drop in their share of the working-age population, largely as a result of self-imposed ceilings on population growth.

Economic and political ramifications

For growth cities, China’s demographic shift hasn’t really hit home yet. That’s because growth cities overall saw net inflows of more than 40 million workers, despite the national working-age population dropping by more than 40 million. This means that over the past decade shrinking cities lost more than 80 million of its working-age population, or more than 10% of their labor force. These trends tend to reinforce each other because the more prosperous a city is, the more population it will attract—a virtuous cycle for the 25% superstar cities and a vicious cycle for the rest.

This all but guarantees that the chasm between growth and shrinking cities will widen over time, the impact of which will be felt both economically and politically.

On the economic front, shrinking cities will face serious fiscal challenges as their land sale revenues decline and their spending on pension and healthcare increases. The central government has sought to turn around these downtrodden cities with massive public investment. But two decades later, the limitations of that approach in reviving regions have become all too painfully clear. While Beijing has become cautious about investment-led growth, it seems at a loss over what alternative regional development strategy it should pursue.

Of course, turning around declining regions is a tall order anywhere in the world, and most governments have had mixed results at best. But given that the majority of Chinese cities will be losing working-age populations at more than one percentage point per year, there is more urgency for Beijing to figure out a solution to the shrinking cities problem before it metastasizes into a political issue.

Shrinking cities seems to be at odds with the national-level narrative of rejuvenation that is tantamount to a political platform. For those 600 million Chinese people that will still live in those cities, their realities may become more of experienced regression than renewal. If the Chinese government doesn’t adequately address intensifying regional divergences, this large constituency could start to question its capability in delivering on rejuvenation.

Houze Song is a research fellow at MacroPolo. You can find his work on the economy, local finance, and other topics here.