China's birth rate tumbles to historic low

Markets move fast. Get the insights you need in 10 minutes with Barclays Brief, a podcast from Barclays Investment Bank. Each week, our experts analyze market themes, helping you anticipate what's next. Listen to Barclays Brief, wherever you get your podcasts. Good morning from the Financial Times. Today is Tuesday, January 20th, and this is your FT News briefing. China's birth rate has fallen again, adding to its demographic crisis.

Saudi Arabia's banks are borrowing in record amounts to fund mega projects. And Chinese electric vehicle makers are or targeting the UK in their expansions overseas. BYD has been expanding rapidly in Europe. Its growth in UK has been incredible. We're seeing another rush of brands coming in this year. Plus, how sustainable are Europe's generous pension schemes? I'm Josh Gabriel. Dwyle and here's the news you need to start.

China has posted its lowest birth rate in years. And measures to boost the number of children aren't having much effect. Demographers are warning that the decline is only going to get worse and that it could have knock-on effects on Chinese economic growth. With fewer young workers, there's been a big push towards automation, especially in manufacturing.

But for now, the economy is doing pretty good. Population data was published alongside GDP figures for 2025, showing a five percent growth for the year. The boost in GDP came from strong export numbers, in spite of US President Donald Trump's tariff war.

Banks in Saudi Arabia are on a borrowing spring. The kingdom's banks borrowed internationally at their fastest ever rate in 2025, more than three times what they'd borrowed the year before. That's according to Fitch, the credit rating agency. All that borrowing is meant to support Crown Prince Mohammed Ben Salomon's Vision 2030, the kingdom's plan to reorient the economy away from oil revenues.

Along with mega projects like Neom and the Line, there's been a push into selling mortgages for the booming real estate market. Initially, local investors were able to provide a lot of the credit that the banks needed, but local funds haven't been able to keep up with the high demand. So lenders have been forced to look for alternative sources of financing from abroad. The kingdom's financial regulator has pushed for the banks to increase their reserves.

The UK has become a launch pad for Chinese EV companies looking to expand to overseas markets. Electric car makers Neo, Aeon, and Zeker have all announced they'll be launching operations in Britain, while MG and BYD have also seen strong growth in the country. That's due in part because London doesn't impose higher tariffs on EVs made in China, which is something that the US and the EU both do. Here to tell us about it is Kana Inagaki. Hi, Kana. Hello, hi Josh.

Okay, so this latest push by Chinese EV brands, who's gonna be rolling out models here in the UK and and what will it look like? So first of all, I mean the you know, the Chinese car makers have been aggressively expanding, not just in the UK, but also across Europe and other markets as well, because their home Chinese, you know, market in China is ultra competitive. There's so many players. And they're looking for higher profit opportunities by expanding sales overseas.

Uh so BYD has been expanding rapidly in Europe. Its growth in UK has been incredible. We're seeing another rush of brands coming in this year. The new brands coming in are Neo. GAC's Aeon and also G Lee's Seeker. They're planning to uh launch their brands in 2026. What's been the thinking behind that strategy of going to the UK first?

Yes, so as you mentioned, I mean the UK does not impose higher tariffs on EVs built in China, the US and also the EU does. And it seems unlikely that the UK will impose tariffs on Chinese cars in the future. But also the UK market has some specific characteristics as well. So for example, the UK doesn't have the homegrown, you know, mass market car manufacturers. So it's easier for the consumers to be more open to new brands.

Um, they're more interested in the affordability of the vehicles and the attractiveness of the vehicles, the technology that's in there. So it's easier for, you know, brands that don't really have name recognition to come in to the UK. What does this mean for the UK economy and potentially for the country's consumers? I think for, you know, UK consumers it does offer them a much more variety of choices.

There is a sense that uh Chinese car makers are very strong in EVs, which is the case. They do have EVs that are quite affordable considering the various technologies that are packed into their vehicles. But in addition to EVs, they're also quite aggressive in selling plug in hybrids as well. And then I guess in terms of the economy itself, I mean, the UK has still They still haven't been able to return to pre pandemic vehicle sales uh volumes.

So having these new entrants from China and elsewhere will help to increase the car sales. But one thing is um the UK government has been very keen to attract new car makers to produce in the UK, uh, which would obviously lead to more jobs as well. But that has been quite a difficult effort because You know, companies still find it very expensive to produce in the UK considering the high energy cost.

You mentioned that these players have not actually been that keen on setting up production in the UK proper, but we do know that there's Chinese EV brands that are setting up factories in the EU. Are we gonna continue to see prices go down and and maybe, you know, more Chinese cars on the road in in the UK?

You know, that's the most interesting question I think that we need to ask for this year. So BYD is going to start manufacturing cars in Hungary and then China's Leap Motor is also going to produce cars in Spain. from this year. So it raises the question of whether some of these Chinese brands that are producing locally in Europe will be able to bring even, you know, lower priced EVs and other vehicles.

to European markets, including the UK, there is still a lot of debate on this. I mean you know, some people say that it it it costs more to produce in Europe. So there's questions on how much the Chinese brands can actually lower the pricing. But either way, you know, producing locally would make it easier to ramp up volumes and there will be other benefits as well. So it'd be interesting to see how the local production is going to accelerate their expansion policies.

European governments are creaking under the strain of their generous state pension scheme. In some countries, the cost of looking after older residents can amount to 15% of GDP. And with aging populations and strained finances, these pension schemes are looking kind of unsustainable. Governments are facing tough policy choices.

I'm joined by the FT's pensions correspondent, Mary McDougal, to discuss. Hi, Mary. Hi, Jos. Okay, so first of all, just give us a sense of how generous these European pension schemes really are. They're pretty generous compared with other countries. If you look across the EU as a whole, nearly half of the bloc's social protection expenditure is spent on old age and survivor benefits. That's mainly pensions. yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw'n yw

be paid as pension income, it's quite a lot compared with other places. So around seventy percent in Italy and Spain, pensioners get as income compared with the average career earnings, which compares with more like fifty percent across the OECD, which is known as

the rich club of countries. Um, but the particular headache that European countries have got is that for most of the big countries like Germany, France, Italy, Spain, they are paid for by the state via current pension contributions. They're not ymwneud â nhw'n ymwneud â nhw'n ymwneud â nhw'n ymwneud â nhw'n ymwneud â nhw'n ymwneud â nhw'n ymwneud â nhw'n gweithio.

Okay, so that's this issue of unfunded pension schemes that they're not actually invested in the same way. There's also this issue of an aging population in Europe. Can you explain kind of how the pressure is playing out for European governments? Yeah, so as you say, the demographic story is

bigger in Europe than it is in any other continent. It's the world's oldest continent. The birth rate's very low. That means you have fewer working age people supporting the pensions of a growing number of retirees. The other pressure governments are facing is the competition for capital. So Europe's under a lot of pressure to invest more in defence. You just need to look at what's going on in Greenland.

energy security and other new technologies like AI. Right. So you've got the population issue and then European governments are also saying that they need to free up budget to spend money on these other things. What can they do to deal with the pension burden? Well, the obvious thing to do is to increase the retirement age, which lots of countries have been doing. Another is to make people pay in more towards their pensions.

This is difficult with cost of living pressures and contribution rates are already really quite high in many European countries. Another is to try and boost the private funded pension systems. So this is being done In Germany it's being done in Italy, um, but it's a long, slow process. I mean, often these policies are really, really unpopular though, aren't they? We saw with Emmanuel Macron in France when he upped the pension age, there was pretty serious unrest.

give me a sense of just how unpopular this is politically, how challenging this is politically for European governments. Yeah, it's really difficult. And France is the perfect example. When Macron came in trying to raise the retirement age from sixty two to sixty four, had these rights, as you said, and then he's suspended them, although they are set to come in later.

No government in the UK is dead to break the triple lock for fear of losing the next election. The triple lock's a policy whereby the state pension rises by CPI average wages or two point five percent. So that basically means the pension is always gonna go up by the highest amount, whether it's

average wages, inflation, or two point five percent, it's it's gonna go up. And that's why the state pension in the UK currently costs around five percent of GDP and that's projected to rise to seven point seven twenty seventy. Popular generally. trying to change pension policy because people are paying in towards their pensions during their working life with the promise of an income being paid back at the end and this is being eroded.

I is this just a problem of economic growth for Europe more than pension policy? If Europe's economies were growing more, would this problem sort of go away? So some economists that I spoke to for this certainly thought that Europe's done a lot of reforms as we've discussed to try and

curb the cost of their pension systems. And if the economy performed better, then the trajectories would be sustainable for how much they're gonna spend on their pensions. You just need to look at some of the funded systems. Look at Canada, Netherlands,

Australia, where a lot of retirement income is paid for out of investment performance, because asset returns have tended to perform much better than economies have in recent decades. And if the economies perform better, this would help the affordability of the unfunded schemes. Mary McDougall is the FT's pension correspondent. Thanks, Mary. Thanks, Josh.

You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news. Thinking long-term about your investment career, hear stories. Published by Capital Client Group Inc.

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