By Kevin Swift and John Richardson
THE FIRST AND prime key indicator for those assessing opportunity is population, which determines the size of the total addressable market (TAM). It is why companies have been attracted to China and all those consumers.
In addition to sheer size, the age composition of the population, incomes and the development of downstream durable and non-durable end-use markets, and other factors also affect plastic resin demand.
But in the end, after assessing all these factors, one divides demand by population to calculate per capita demand, a key figure for comparing different markets.
Demographers have begun to rethink future population growth and are concluding that world population will peak sooner and lower due to declining fertility in Africa and low fertility in China and a few other nations that may never recover. This could upend global market assumptions and dynamics.
China’s population has grown from 546 million in 1950 to the official 1.43 billion in 2020. The one-child policy of 1979-2015 resulted in declining fertility, a skewed male/female ratio and a peaking of population, with India now supplanting China as the most populous nation.
The United Nations expects China’s population to fall to 1.26 billion in 2050 and 767 million by 2100. These are down 53 million and 134 million, respectively, from earlier UN projections.
Recent analyses by demographers (Shanghai Academy of Sciences, Victoria University of Australia, etc) question the demographic assumptions behind these projections and expect China’s population could fall to as low as 1.22 billion in 2050 and 525 million in 2100.
Questions on birth statistics
Demographer Yi Fuxian at the University of Wisconsin has questioned assumptions about current Chinese population and the likely path forward. He examined China’s demographic data and found clear and frequent discrepancies, such as the inconsistencies between reported births and the number of childhood vaccines administered and with primary school enrolment.
These should parallel each other, and they do not. Analysts see that there are strong incentives for local governments to inflate data. Reflecting Occam’s Razor, the simplest explanation is that the births never happened.
Yi posits that China population in 2020 was 1.29 billion, not 1.42 billion, an undercount of over 130 million. The situation is most acute in northeast China where the economic engine has stalled. Yi speculated that with low fertility rates – 0.8 versus replacement level of 2.1 – China’s population will fall to 1.10 billion in 2050 and 390 million in 2100. Note that he has another even more pessimistic projection.
We have seen other estimates that China’s population could be 250 million less than what is currently reported. China accounts for roughly 40% of global plastic resins demand and as such, alternative futures concerning population and other factors significantly influence global plastic resins demand dynamics.
China’s current per capita resins demand is currently relatively high compared to most advanced economies, the result of the plastics-content of finished goods exports and China’s role as the “factory to the world”. This is changing.
Introducing the scenarios
With this in mind, we examined some of Yi Fuxian’s assumptions and developed an alternative scenario concerning a potential future for China’s population and plastics demand. For our baseline, we use the 2024 UN projections on population for China.
This latest UN projection of China’s population was revised downwards from prior assessments. We then used most recent ICIS Supply & Demand database projections to 2050.
This shows China per capita major resins demand – acrylonitrile butadiene styrene (ABS), polyethylene (PE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC) – rising from nearly 73kg in 2020 to 144kg in 2050.
We also examined the period after 2050 and assumed per capita resins demand would rise further to 150kg in the 2060s before moderating towards the end of century – to 141kg in 2100 – a transition and trajectory typical of maturing economies. For example, US per capita demand for these resins peaked at 101kg in 2004.
For an alternative scenario, we assumed that 2020 population was 1.42 billion, but that the fertility rate going forward will average 0.75 births, resulting in a 2050 population of 1.15 billion and 2100 population of 373 million. We called the scenario Dire Demographics.
In this scenario, we also assumed that due to economic challenges, resins demand will mature earlier and at a lower level. This is premised on China’s not escaping middle-income status into an advanced economy.
The demographic dynamics provide too many economic headwinds. In this scenario, China loses global manufacturing output share due to other nations’ reshoring initiatives and trade tensions, resulting in lower resins demand from plastics content of lower – relative to the base case – finished goods exports.
We also assume that the services sector will gain as a share of the Chinese economy. Moreover, property and debt issues weigh on economic dynamism into the 2030s. Structural changes are underway. In this case, we modelled per capita resin demand as rising from 73kg in 2020 to reach 101kg in 2050 and peaking at 104kg.
Results of the scenarios
Under the Base Case, major resins demand rises from 103.1 million tonnes in 2020 and starts to mature in the 2030s, reaching 188.6 million tonnes in 2050. After 2050, a falling population and evolving market/economic dynamics adversely affect demand, which falls to 89.3 million tonnes in 2100. This is a level consistent with pre-2020 demand.
With a more pessimistic outlook on population and reduced economic dynamism under the Dire Demographics scenario, major resins demand rises from 103.1 million tonnes in 2020 and starts to mature in the 2030s, reaching 116.2 million tonnes in 2050.
With a falling population and adverse economic dynamics, demand falls to 38.7 million tonnes in 2100, a level consistent with pre-2010 demand.
Implications for self-sufficiency and trade
There are implications for China plastic resins self-sufficiency and its net trade balance. In the Base Case, China major resin production rises from 75.7 million tonnes in 2020 to 183.9 million tonnes in 2050.
The Base Case suggests China remains a net importer of major resins, but its net import position falls from 27.4 million tonnes in 2020 to 4.7 million tonnes in 2050. We only focus on the period to 2050.
During the immediate period, supply of resins largely proceeds as planned as China aims for self-sufficiency. But by the 2030s, capacity expansion slows in an oversupplied global market and rising trade tensions.
As result, under the Dire Demographics scenario, production is more than sufficient and by early-2030s China attains self-sufficiency in these resins and emerges as a net exporter of 3.6 million tonnes in 2035, 7.1 million tonnes in 2040, 9.7 million tonnes in 2045 and 11.6 million tonnes in 2050.
With dire demographics and challenging economic dynamics, self-sufficiency and a net export position is reached sooner but is “managed” to ease trade tensions.
Of course, we took a rather dour look at demography, a future of low and declining fertility. “Demographics is destiny”, as the 19th century French philosopher Auguste Comte said. But destiny is not set in stone. This is one possible future.
There are other possible futures, including ones in which fertility rates recover and new wave of technological innovations combine to enhance productivity and thus economic growth. But the scenario presented here can help chemical companies think about uncertainty in a structured way and make decisions that affect their future – to ultimately write their own story.