An ANZ economist warned on Wednesday that China’s aging population will have a huge impact on the world as the global supply chain relies heavily on the world’s second largest economy.

China’s once-a-decade census published on Tuesday showed the mainland’s population had grown to 1.41 billion people as of November 1, 2020. This was the slowest growth rate since the 1950s.

“The trend of age dependency will increase … This is a warning not just for China but for the whole world as China is the core of the supply chain,” said Raymond Yeung, chief economist of Greater China at ANZ. said CNBC’s Squawk Box Asia.

“In the next few years, China will lose 70 million (its) workforce. This is a big shock for the global supply chain.”

Two elderly women sit on a street bench in China. By 2050, a third of the Chinese population will be over 60 years old.

Zhang Peng | LightRocket | Getty Images

He added that there would be another possible impact on financial markets as China’s high savings rate supports global markets. China has one of the highest personal savings rates in the world, and many individual investors put their extra money or the money is held in pension funds.

The census also showed births continued to decline, falling 15% in 2020 – a fourth straight year of decline.

Experts have said that China’s aging problem goes beyond its one-child policy and that other changes are needed to encourage growth as births decline and the population ages. Similar to other major economies, high housing and education costs in China have deterred people from having children in recent years.

I think this is a very urgent problem that China really needs to tame this gray rhino because everyone knows the problem is there, everyone knows they have to do something.

Raymond Yeung

Chief Economist of Greater China, ANZ

Yeung told CNBC that the country must instead increase its labor productivity.

He said it was unlikely to reverse the country’s declining birth rate, even if it eased the one-child policy.

“More importantly, China should continue growth through technological development, pursue high-tech, high value creation and transformation of the entire supply chain in order to sustainably support economic growth.” He added that this was a “more realistic” approach than focusing on population numbers.

China’s economy has relied heavily on industries such as manufacturing, which require large amounts of cheap labor. However, rising wages make Chinese factories less attractive, while workers need higher skills to make the country more innovative.

“I think this is a very urgent problem that China really needs to tame this gray rhino because everyone knows the problem is there, everyone knows they have to do something,” he said.

The term “gray rhinoceros” refers to very obvious but ignored threats.

– CNBC’s Evelyn Cheng contributed to this report.