Demography, digitisation and China’s race against time for effective policy

In considering the next two decades of Indo-Pacific security, there are two trends that stand out; the trajectory of China’s economic growth, and the ongoing digitization of society. While it is clear that the first of these—China’s economic trajectory—will be a key determinant of dynamics in the region, it is far less clear what that trajectory will look like. Will the country see continued growth, or might demographic and structural issues lead to stagnation? The continuation of the second trend, digitization, seems more assured, though it remains to be seen what the implications will be for the region and the world. 

Trend 1: Chinese growth—or lack thereof 

The rise of China has been a source of fascination and debate for foreign analysts since Deng Xiaoping first set the country on a path of reform and opening in 1978. By the 1990s, the scale of the growth unlocked by Deng’s reforms was no longer in question: it was considered to be only a matter of time before the Chinese economy overtook the United States as the world’s largest. The scale of this economic dynamism is the primary factor that has enabled China to step into the shoes of a great power over the last decade, and to adopt a more assertive attitude in the region, especially in the South China Sea. 

However the sheer size of the economy is only one measure of national power. Chinese leaders and international observers alike have long noted the challenge China faces in escaping the “middle-income trap”—a pattern in which per capita income in a country stagnates before that country has fully industrialized and reached “high-income” status. For China, this risk is compounded by demographics. In part due to the One Child Policy, in part due to the typical fertility decline observed in growing economies, China’s population is aging rapidly. Managing the fallout of these demographic changes will be an existential challenge for the Chinese Communist Party (CCP) in the 2020s and 2030s. If the decline in working-age Chinese is not matched by a lively new spurt of economic growth, the CCP may struggle to meet the social safety needs of a new generation of retirees. A domestic economic meltdown of this kind would likely be a significant check on the CCP’s ambition and assertiveness abroad, keeping party leaders busy at home and distracting them from regional ambitions. 

A race to the bottom, in which militaries feel pressured to deploy immature technologies in order to keep up with competitors, is a real and concerning possibility.

Of course, it’s entirely possible that China will manage to weather this brewing storm. CCP officials are acutely aware of the challenge they face, and are implementing structural reforms intended to foster continued growth. One especially striking recent example is the loosening of the household registration system known as hukou, which has restricted the ability of rural workers to migrate to cities. The recently-adopted 14th Five Year Plan promises to make it much easier for rural residents to move to cities o f less than five million people, which—if enacted—would be a boon to China’s enormous, underutilized rural labor force. This and other similar reforms may provide enough of a boost to save the CCP from the middle-income trap or a demographic crisis. 

Trend 2: Digitization, informationization, intelligentization 

If any trend has been as inexorable as the rise of China over the last four decades, it’s digitization—the increasing ubiquity of computing and digital communications in every facet of society. This trend encompasses the spread of personal computers, the internet, smartphones, and most recently artificial intelligence (AI), as well as the integration of each of these technologies into business, education, healthcare, government, and the military.  

In recent years, the security impacts of digitization have become an especially hot topic. Flashy technologies such as autonomous weapons or unmanned vehicles often get most attention, but at least as important are fundamental changes in underlying military infrastructure. Chinese military planners, for instance, talk about both “informatisation” and “intelligentisation:” the former refers to the need for modernized sensors, networking and communications, whereas the latter, a newer concept, points to the role that increasingly “smart” technologies can play in all kinds of military applications. The U.S. military has used the term “network-centric warfare” to refer to similar ideas as “informatization,” and more recently has also begun to call for “AI readiness.” The common theme across these buzzwords is how thoroughly digitization is pervading military affairs, across logistics, communications, command and control, intelligence/surveillance/reconnaissance, and other areas. While it remains to be seen how widely specific technologies—such as autonomous weapons—will be deployed, there is no question that digitization is already driving huge changes in the underlying structure and function of militaries across the Indo-Pacific region and the globe.  

Digitization goes hand in hand, however, with a conundrum: move too slow, and competitors may outstrip you; move too fast, and you risk deploying immature, unreliable technologies. When it comes to AI, the latter risk is especially acute. Militaries across the region are plowing ahead with the development of AI capabilities, citing similar investments by adversaries as justification. But today’s AI systems are not nearly reliable or secure enough for widespread military use: they are opaqueeasily fooled, and prone to unexpected failure. Using AI for low-stakes tasks like recommending a Netflix show or tagging photos on social media is one thing; deployment in high-stakes, fast-moving, adversarial contexts—in other words, most military applications—is totally different. A race to the bottom, in which militaries feel pressured to deploy immature technologies in order to keep up with competitors, is a real and concerning possibility. 

Implications and future scenarios 

These trends suggest two possible clusters of future scenarios. First, if China’s growth trajectory continues, it seems most likely that its increased assertiveness across the region over the last decade will also continue to grow. If so, the possibility of armed confrontation—for example in China’s maritime periphery—will also rise. In these scenarios, the extent of digitization in the region’s militaries will be a significant risk factor. Even if the reliability and security issues of current AI systems can be solved, greater reliance on autonomous and AI-enabled systems will bring new challenges to international stability and crisis management in the region. Managing these dynamics will be a critical challenge in the coming decades. 

A second cluster of scenarios has received even less analysis: what would the Indo-Pacific security landscape look like with a China that is no longer buoyed by strong economic growth? An optimistic view might hope that if China’s growth subsides, its regional ambitions will likewise fade, and the growing tensions of the 2010s will be eased. This is certainly possible. However, it is at least as likely that stuttering growth could make rash action more attractive to the CCP, not less. This could be particularly dangerous regarding Taiwan: if time is no longer on China’s side, Beijing may become less patient, less risk-averse, and thereby more likely to use force to unify the island with the mainland. Current planning by Chinese competitors and adversaries seems to focus almost exclusively on the risks of a rising China, but this may be shortsighted. Looking more than a few years ahead, it is far from clear that China’s power will continue to grow, and too little has been written about what might happen if it does not. 

There’s no way to know exactly what the future of the Indo-Pacific region holds. We can be confident, however, that two questions will matter a great deal: will China’s rise continue, or stall? And might increasing digitization disrupt international stability? In planning for the next two decades, accounting for the possible implications of these two questions will be essential. 

The Indo-Pacific Futures Project receives support from the Japanese Embassy in Australia. ANU National Security College is independent in its activities, research, and editorial judgment and does not take institutional positions on policy issues. Accordingly, the author is solely responsible for the views expressed in this publication, which should not be taken as reflecting the views of any government or organisation.


Helen Toner

Director of Strategy, Center for Security and Emerging Technology (CSET), Georgetown University