(Yicai Global) Dec. 28 -- China's potential decline in newborn births to 14 million this year could mark the beginning of a deflationary period, according to the chief economist at GTJA Research Institute.

People aged between 20 and 50 are the mainstay of home purchases, consumption and production in China, Hua Changchun said in a research report published yesterday. Slowing population growth sparked a downturn in 2013 and could be about to start another, he added.

Incomplete data published by Beijing shows that the number of newborns in many provinces and cities fell 20 percent on average over the year, and extrapolating the figures suggests the nationwide birth rate may have fallen by three million in 2017 to 14 million this year.

Hua forecasts the total fertility rate -- the average number of children dependent on a childbearing-aged woman (15 to 49 years old in China) -- will fall to 1.37 this year from 1.62 in 2017. This will speed up the decline of China's 20- to 50-year old population over the next seven years, resulting in 70 million less people in this age group in 2026, he said.

Japan went through a similar scenario and it led to reduced real estate demand and therefore lower property prices, and a decrease in one-year fixed interest rates, Hua added, saying this eventually burst the country's real estate bubble.

"[China's] slowdown in population growth started earlier, but was partially alleviated by the government allowing parents to have a second child," Hua said, adding that "the problem will be exposed again as the incentives from the policy decline." He believes that the problem will continue unless the government makes further changes.

China brought in its universal two-child policy in 2015, before which most couples were limited to having just one child. Despite the eased restriction, rising living costs, declining willingness caused by rising education standards and a reduction in the number of women of childbearing age have all hampered population growth.

Editor: James Boynton