China's birth rate tumbles to historic low

0:02Good 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 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 Gabordoin, and here's the news you need to start your day.

0:52China 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 5 % growth for the year. The boost in GDP came from strong export numbers, in spite of U.S. President Donald Trump's tariff war.

1:35Banks in Saudi Arabia are on a borrowing spree. 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 bin 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.

2:15So 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.

2:30The UK has become a launchpad for Chinese EV companies looking to expand to overseas markets. Electric car makers NIO, Aon, 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 going to be rolling out models here in the UK and what will it look like? So first of all, I mean, 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 market in China is ultra competitive.

3:22There are so many players and they're looking for higher profit opportunities by expanding sales overseas. And 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 NIO, GAC's Aeon, and also Geely's Zeeker. they're planning to 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.

4:11But 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. 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.

4:53There is a sense that 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 volumes. So having these new entrants from China and elsewhere will help to increase the car sales. But one thing is the UK government has been very keen to attract new car makers to produce in the UK, which would obviously lead to more jobs as well.

5:40But 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 costs. 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 going to continue to see prices go down and maybe, you know, more Chinese cars on the road 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.

6:17And 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 lower priced EVs and other vehicles to European markets, including the UK. There is still a lot of debate on this. I mean, some people say that 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, producing locally would make it easier to ramp up volumes. and there will be other benefits as well. So it'll be interesting to see how the local production is going to accelerate their expansion policies.

6:59Kanna Inagaki is the FT's industry editor. Thanks, Kanna. Thanks so much.

7:10European governments are creaking under the strain of their generous state pension schemes. 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 McDougall, to discuss. Hi, Mary. Hi, Josh. 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 social protection expenditure is spent on old age and survivor benefits.

7:55That's mainly pensions. That's more than spent on sickness and disability, and it's much more than spent on families and children. And then if you look at how much people in retirement can expect to be paid as pension income, it's quite a lot compared with other places. So around 70 % in Italy and Spain, pensioners get as income compared with average career earnings, which compares with more like 50 % across the OECD, which is known as the rich club of countries. 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.

8:34They're not put into a different pool of assets. So it's dependent on the growth of the economy for the pensions of the current workers to be paid out in the future. 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.

9:14The other pressure governments are facing is the competition for capital. So Europe's under a lot of pressure to invest more in defense. 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.

9:48This 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, 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.

10:26and France is the perfect example. Macron came in trying to raise the retirement age from 62 to 64. 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 2.5%. So that basically means the pension is always going to go up by the highest amount, whether it's average wages, inflation, or 2.5%, it's going to go up. And that's why the state pension in the UK currently costs around 5 % of GDP, and that's projected to rise to 7.7 by 2070.

11:05But it's also not 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. 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? Yeah, 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 going to spend on their pensions.

11:45You 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 form 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.