Ageing Asia: Is the Demographic Challenge Growing Wider?
Changing population structures in key Asian economies are raising concerns about long-term growth prospects and pressure on public finances. Lower birth rates in countries such as China, Japan and South Korea are shrinking the working-age population, which can slow economic expansion and increase government spending on pensions and healthcare. At the same time, these shifts are opening new opportunities in sectors that serve older populations or address labour shortages through technology.
Populations in parts of East Asia are shrinking and ageing rapidly, posing risks to sustained economic growth in China, Japan and South Korea. Policy measures and financial incentives have so far failed to meaningfully reverse the decline in birth rates. Demographic trends are also generating demand in emerging areas such as healthcare, automation and services for seniors.
China was the world’s most populous country until India surpassed it in 2023. Its population stood at approximately 1.4 billion at that time. However, the outlook has deteriorated. The country recorded a population decline for the fourth consecutive year in 2025, with births falling to 7.92 million while deaths reached 11.31 million. The crude birth rate dropped to around 5.63 per 1,000 people. Life expectancy has risen steadily, reaching approximately 79 years by 2025. Projections indicate that nearly 30% of the population could be aged 60 or older by 2040, one of the highest shares globally. If current trends continue, China’s share of the world’s population could fall significantly by the end of the century, with important consequences for the second-largest economy.
Similar pressures exist elsewhere in Asia, though the causes differ. Several European countries, such as Italy and Spain, also record very low fertility rates, which could lead to substantial population reductions over the coming decades.
China’s situation stems in part from the one-child policy implemented in 1979 and phased out in 2016. The policy contributed to a strong cultural preference for sons in one-child families, resulting in a lasting gender imbalance that limits future birth rates. Current support includes modest annual payments for young children, alongside broader efforts to raise the retirement age, expand automation and artificial intelligence to offset labour shortages, and develop the “silver economy”, sectors focused on older consumers, including healthcare, assistive technologies, leisure, tourism, insurance and pension products.
Japan: An early example of “shrinkonomics”
Japan’s population reached its peak of 128 million in 2008 and has been declining since. Long-term projections suggest it could fall below 70 million by 2100. The country maintains one of the world’s highest life expectancies, which has driven a sharp rise in the old-age dependency ratio.
Fertility rates dropped below the 2.1 replacement level decades ago and have remained low. Factors include societal norms that discourage births outside marriage, high costs of child-rearing, and challenges for women balancing careers and family responsibilities. Japan has historically relied less on immigration than many other developed nations, though inflows have increased modestly in recent years. Even large-scale immigration would struggle to fully offset the shrinking working-age population.
Policy responses include gradually raising the retirement age (with many companies moving from 60 toward 65), heavy investment in robotics and AI to boost productivity and expanded childcare support. Many older workers and mothers nevertheless return to the workforce in part-time or contract roles with reduced pay and benefits.
The next wave: South Korea
South Korea faces even more acute challenges, with a total fertility rate that remained below 1.0 in recent years (around 0.80 in 2025, one of the lowest globally). On current trajectories, nearly half the population could be aged 65 or older by 2072 and overall population decline may begin before 2050.
Contributing factors mirror those in Japan: intense work pressures, high housing and education costs (including extensive private tutoring that can consume a significant share of household income) and traditional gender roles that place heavier domestic responsibilities on women. The gender pay gap remains among the widest in OECD countries. Despite substantial government spending on incentives, such as extended leave and cash payments, birth rates have shown only limited response. Experts note that deeper societal changes may be needed beyond short-term financial support.
India: A contrasting demographic advantage
While East Asia grapples with ageing, India benefits from a younger population structure. The IMF projects that India will overtake Japan as the world’s fourth-largest economy by the end of 2026 or shortly thereafter, with only the US, China and Germany ahead. Further growth could see it challenge Germany for third place in the coming decades. India is expected to have over 800 million people of working age (20–59) before the middle of the century, providing a significant labour force advantage.
On a per-capita basis, India’s income remains much lower than Japan’s or other advanced economies. Nevertheless, its large and growing working-age population supports stronger potential GDP expansion compared with shrinking-workforce nations.
Broader implications and responses
Across ageing Asian economies, shrinking workforces are likely to increase strain on pension systems, healthcare and government budgets, potentially pushing up borrowing costs. Potential mitigations include greater use of artificial intelligence and automation, development of the silver economy, selective immigration policies and more comprehensive social reforms to support families and gender equality. However, such changes typically take many years to produce results.
Demographic shifts are also reshaping investment landscapes. Demand is rising for technologies that enhance productivity (such as AI and robotics) and for goods and services targeted at older populations.
In summary, several major Asian economies face significant and widening demographic headwinds from rapid ageing and ultra-low fertility. Japan and South Korea are furthest along this path, while China is transitioning quickly due to its earlier policy choices. India stands out with a more favourable youthful demographic profile that could underpin stronger long-term growth. These changes will influence economic performance, public finances, and sector opportunities for decades to come.
Sources :
National Bureau of Statistics of China, January 2026 release 2–3. World Health Organization and UN population projections
OECD and national statistics 5–10. Government data from Japan and South Korea, IMF World Economic Outlook (2025–2026), and related demographic reports