WRR: Netherlands must review its economic dependence on China - and not just for security reasons
For demographic reasons, China is transforming from an export-oriented economy to a consumer market, with fundamental implications for the Netherlands.
Published on January 4, 2025
According to the WRR, the Netherlands must respond proactively to the demographic transition. Experts stress the importance of timely and structured decision-making about the Dutch position in a changing global economy. This calls for strategic policies that look beyond economic factors alone.
China's aging and shrinking workforce threatens the stability of global production chains, including that of the Netherlands. China's role as “the factory of the world” is under pressure, and the Netherlands, with a 16% import dependency from China, is at risk. Demographic changes are forcing a reconsideration of import sources. India and other Southeast Asian countries offer potential as alternatives, thanks to their demographic dividend. This is crucial for Dutch sectors, such as electronics and solar energy, which rely heavily on Chinese imports. The challenge lies in strategically shifting trade flows to mitigate economic risks and anticipate global demographic transitions. A recent publication by the WRR shows that it is high time to diversify economic ties and build resilience in a changing global market.
China faces an unprecedented demographic challenge. The labor force has been shrinking since 2015, and according to UN projections, by 2050, China will have as many as 230 million fewer workers than in 2013. Gray pressure, already at 19% in 2021, is expected to rise to more than 50% by 2050. This drastic shift directly affects China's position as a manufacturing giant. The country is transforming from an export-oriented economy to a consumer market, which has fundamental implications for the Netherlands, where more than 16% of total imports came from China in 2022.
Dutch Vulnerability
Dutch dependence on Chinese imports is worryingly high. In 2022, the Netherlands imported 139 billion euros worth of goods from China, compared to only 4.6 billion euros in 1999. Dependence is particularly critical in specific sectors: 89% of solar panels, 40% of toys, and 25% of electrical machinery come from China. This one-sided dependence creates vulnerability, especially as China's demographic contraction pressures export capacity. Although Chinese imports have contributed to lower consumer prices, the risk of this dependency is becoming increasingly apparent.
Recent OECD research points to significant shifts in global trade flows. Imports from China and Germany are expected to decline, while the United States and Southeast Asia are becoming more important trading partners for the Netherlands. Demographic factors drive this shift: while China and Germany are aging, the labor force in the U.S. and Southeast Asia will remain stable or even grow. For the Netherlands, this means that labor-intensive sectors, in particular, must prepare for changing trade relations.
Opportunities in India and Southeast Asia
India and several ASEAN countries offer opportunities as alternative production locations, according to the WRR. These regions benefit from a “demographic dividend” - their labor force is relatively large relative to the total population. These countries can potentially take over the production capacity that China is losing due to aging and shrinkage. For the Netherlands, this means a necessary realignment of trade relations. However, the transition requires careful planning and strategic investment in new trade relations.