Today, ancient ideologies continue to shape the goals and principles of China’s society and foreign policy. But as China grapples with shifting demographics, cultural and generational clashes, and a slowdown in economic growth, will Chinese society embrace more or less of its traditional values?
Comments are edited excerpts from part three of our three-part continuing education series China: A Deeper Look. Learn how to earn CE credits now.
China’s Society Today
With a population of more than 1.4 billion, China’s demographics are extremely diverse and defined by a multitude of factors such as age, gender, generation, geographic location, and economic development.
The age factor is complex. Currently, China still has a robust working population, with people aged 20 to 60 years old accounting for 60% of the total population.
But the country will soon face an acute aging problem as its birth rate is dramatically decreasing. By 2050, if the birth rate doesn’t improve, it’s estimated that the median age in China will be 50 years old and almost 60% of the population will be 60 years or older.
In comparison, the population is not aging as quickly in the United States. According to the report “Attitudes About Aging: A Global Perspective” from the Pew Research Center, the median age in the United States in 2050 is estimated to be 41 years old. The report also projects that the median age in Japan, which currently has the oldest population in the world, will reach 53 years old in 2050.
China’s former one-child policy is certainly a major contributor to this problem, which had been in effect for 30 years until 2018. Couples can now have a second child without restrictions.
Chinese society also lives by an evolving set of values. And while these values have been influenced by Western culture, the traditional Confucian value system is still the dominant value system in China today, after thousands of years of practice.
As shown in the chart below, there are five key aspects of the Confucian value system—the doctrine of mean, social order, collectivism, success, and individual virtue—all of which allow this ancient ideology to help maintain governance, stability, and prevent disruptions in Chinese society.
China’s society is also experiencing challenges and developments distinct from the rest of the world.
One of the biggest challenges is what Chinese people have termed “involution.” Literally translated to “inward curling,” this term is used to express a feeling of burnout, particularly among China’s younger generations, as they deal with increasing pressure to succeed in work and in life.
Other challenges include the slowdown of China’s economic growth and the impact of COVID-19, which has made it incrementally harder for young people to secure a good job and establish themselves. Chinese people are also experiencing an imbalance of efforts and rewards, especially when they realize that their salary increases may never catch up with increasing home prices.
The traditional Confucian value system is still the dominant value system in China today, after thousands of years of practice.
Looking at key developments, Generation Z is a driving force in Chinese society. They are more individualistic than previous generations, prioritizing their own feelings over meeting expectations of others. They’re also China’s first generation of digital natives. Because this group has shown it can successfully leverage social media attention to influence real-world outcomes, the Chinese government is now paying more attention than ever before to the online environment.
Another development is the rise of nationalism, particularly among Generation Z. Their value judgements are increasingly derived from their life experiences, which helps amplify their confidence in Chinese culture and values and in the government’s actions and policies.
China’s Approach to Foreign Policy
While economic and geopolitical factors can shape near-term foreign policy, modern China is also influenced by its long history of feudalism, which began over 2000 years ago. While feudalism in China eventually ended, it was followed by more than a century of civil and foreign wars, exacerbating the modernization gap between China and the West, until the formation of the People’s Republic of China (PRC) in 1949.
Generation Z is a driving force in Chinese society.
The China-Taiwan Conflict
The conflict between China and Taiwan is a sovereignty issue stemming from the Chinese Civil War. Since then, Taiwan’s current government, the Republic of China (ROC), has been governed separately from the PRC.
The PRC’s official policy toward Taiwan is composed of two parts: Taiwan is part of China, and China’s preference for a peaceful reunification with Taiwan.
In the 1980s, Taiwan’s implementation of a democratic governance system allowed the Taiwanese populace to display their views more outwardly on the “One China” policy by voting for political parties that lean pro-reunification or, in recent elections, more de facto independence.
For the past 40 years, China, Taiwan, and the United States have largely maintained the status quo, but tension has risen between the three parties, driven by the West’s geopolitical interests, China’s reunification mission, and growing pro-independence sentiment in Taiwan.
We believe a proactive Chinese military invasion of Taiwan remains unlikely in the near future for three reasons—China may not win in a conflict with Taiwan given the potential intervention of the United States, Japan, and the North Atlantic Treaty Organization (NATO); the costs of a potential invasion (such as economic sanctions and global isolation) could be catastrophic for China; and the West’s lack of support for an independent Taiwan.
However, the risk to both Chinese and Taiwanese equities has risen, and market sentiment for these asset classes may continue to be volatile.
Understanding China Series
Part 1 | Politics and Governance
Part 2 | Economic System
Part 3 | Society and Foreign Policy
Sophie Gao, CFA, is a global research associate.
Want more insights on the economy and investment landscape? Subscribe to our blog.
GICS Reclassification: Impact on Emerging Market Investors
