Commentary: How China’s Population Scale Is Helping It Win the Trade War

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[para. 4][para. 5][para. 6][para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13] The article asserts that China’s main competitive advantage in these trade and technology conflicts has shifted from mere population size to the systemic “population scale effect.” This effect is defined as the combination of population quantity and the density and quality of technological and knowledge connections—both horizontally (across space) and vertically (over time). China has leveraged reforms and opening-up to enhance both, benefiting from a vast population now more interconnected domestically and internationally than at any previous time. The scale effect is credited as the driver behind China’s rapid progress in fields like electronics, new energy vehicles, and military technology. For example, China’s extensive rare earth industry benefits from a full supply chain and stable, high domestic demand, and its chip development, while still lagging in areas like lithography, is believed to be surmountable due to the size and capability of its engineering workforce. In the military sphere, China’s technological advances and large supply of engineers have enabled it to compete with or surpass the U.S. in areas like radar and unmanned systems, despite comparatively lower defense spending relative to GDP.

[para. 14][para. 15][para. 16][para. 17][para. 18][para. 19] Market scale is highlighted as a resilient foundation for China’s economic confidence. China is now the world’s largest market in numerous sectors and can withstand external shocks, such as U.S. tariffs, better than smaller economies like Japan. Initiatives such as the Belt and Road are seen as means to further expand this scale effect internationally, though the article argues that internal population and market size are more crucial than external expansion.

[para. 20][para. 21][para. 22][para. 23][para. 24][para. 25][para. 26][para. 27] However, the authors sound the alarm over China’s rapidly falling fertility rate, which has dropped more than 50% between 2016 and 2023—outpacing even Japan and South Korea’s slower declines. With 2024 newborns accounting for just 7.2% of the world despite China’s 17.5% share of global population, this trend threatens to erode the very scale advantage underpinning China’s success. If not reversed, China could lose its lead in industrial, technological, and innovation capabilities.

[para. 28][para. 29][para. 30][para. 31][para. 32][para. 33][para. 34][para. 35][para. 36][para. 37][para. 38] The solution, the authors argue, lies in massive investment in children. They advocate for large-scale childcare subsidies—potentially up to 5% or more of GDP, giving monthly payments of 1,000-3,000 yuan per child and significant tax breaks—to rapidly boost fertility above replacement level (2.1), thus stabilizing population above 1 billion. Such policies would transform parenting into a respected, well-paid career, ensure technological and industrial dynamism, and underpin long-term national power. The authors also propose a National Population Development Fund financed by ultra-long government bonds, linking incentives to demographic realities, and freeing up resources from already over-invested sectors.

[para. 39][para. 40][para. 41][para. 42] The piece concludes that reversing fertility decline is China’s most urgent task and that the country has the cultural, institutional, and economic capacities to take effective action. Failing to do so would undermine its global status and future prosperity. [para. 43][para. 44] The opinions presented are those of the authors, Huang Wenzheng and Liang Jianzhang.