Birth rates in China have plummeted for years, but now experts warn it could hobble the nation’s tech industry.

“This will inevitably suffocate Chinese productivity and innovation,” Daniel Clarke, analyst at GlobalData, said in a new podcast from the research firm.

He argued that China’s population declining for the first time since 1961 means there will be more dependents – such as retirees and children – and fewer workers to support them.

This, in turn, will put further strain on Beijing’s finances, which raises the need for higher taxation.

Clarke argued that this will hurt tech companies, who’s workers and leadership will be affected by surging taxes.

Beijing has introduced polices over the years to make it more attractive to have children.

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However, Clarke suggested that an overworked and overtaxed young population that’s suffered through severe Covid-19 restrictions won’t be inclined to pop out offspring anytime soon.

“China demographic dividend, which has propelled the country to global power and prominence in recent decades, is now over,” Clarke said.  

“The Chinese Communist Party has failed in its attempts to prevent this crisis, and in doing so has further weakened its reputation for competence both domestically and internationally.”

China suffering through lower birth rates could benefit the US tech industry

China and the US have been locked in a tech arms race for years, but the falling birth rates in the People’s Republic could give the States an edge.

“This will inevitably suffocate Chinese productivity and innovation,” Clarke argued. “The US has a much more favorable demographic outlook, partially due to its historic embrace of immigration. This demographic deficit will give the US the edge in its technological and geopolitical battle with China.”

The news comes after the US introduced a string of sanctions against China to prevent cutting edge technology from falling into Beijing’s hands.

Falling birth rates or not, others have argued that China has a clear tech advantage over the US – it’s lax ethics.

One of the people who has made that argument is Nicolas Chaillan, the former United States Air Force’s first chief software officer.

“We have no competing fighting chance against China in 15 to 20 years. Right now, it’s already a done deal; it is already over in my opinion,” Chaillan told the Financial Times in October 2021.

GlobalData is the parent company of Verdict and its sister publications.