China’s declining population and its new three-child policy

Author: Editorial Board, ANU

Family planning has been one of China’s most controversial social policies for decades. Mao Zedong was a strong advocate of population growth, seeing it as a source of strength for the fledgling People’s Republic. From 1949 until Mao’s death in 1976, the Chinese population grew from 540 million to 940 million.

When liberal economic reformers came to power in the late 1970s, China’s rapid population growth was seen as an obstacle to economic development and improved living standards. Deng Xiaoping’s Politburo introduced new rules designed to ensure that population growth does not exceed economic growth: China’s so-called “one-child policy”.

From 1980, new rules set limits for births. Urban workers were limited to one child per family, but could often apply for permission for a second child if the first was a girl. Rural residents are generally entitled to two children, and ethnic minorities are often entitled to three or more.

Although the one-child limit was only strictly enforced in cities, the application of birth limits everywhere was severe. Violators were subjected to heavy fines and forced abortions. To achieve population goals, zealous local officials often forced the sterilization of women who had already given birth to the maximum number of children allowed.

Although many people have suffered greatly from birth restrictions, Chinese citizens have widely accepted the policies as necessary. As any visitor to China is well aware, street-level conversations about China’s social and economic ills usually end with the observation that the Chinese population is too large (ren taiduo).

The problem now is that after spending decades convincing Chinese citizens of the need to lower the birth rate, Chinese leaders now accept that the policy was either unnecessary or wrong. Alarmed by the prognosis of an aging population and shrinking workforce, Chinese policymakers have eased restrictions in recent years. The central government abolished the one-child rule in 2015, allowing all married couples to have two children. Last week he announced they may have three.

So far, policy reversals have done little to stop falling birth rates. Many Chinese families choose to have only one child because the perceived costs of raising children are too high. And many women choose not to have children because structural inequalities at home and in the workplace make pregnancy and child rearing an unwelcome choice. This is a trend common to many companies. Twelve million babies were born in China in 2020, up from 14.65 million in 2019, the lowest rate in six decades. With a fertility rate of 1.3, one of the lowest in the world, China’s population is expected to start declining by the end of this decade. Its working-age population already peaked ten years ago.

The big question is, what does this mean for China and what, if anything, policymakers should do about it?

Some analysts fear that the Chinese economy could find itself caught in an income trap if the population begins to decline before reaching high-income status. Others fear that the aging population could become a huge burden on the younger generations and on China’s fiscal resources. International relations scholars reflect on the consequences of population decline on China’s potential as a superpower and on the balance of power with the United States, which is better placed to exploit immigration to offset its equally low birth rate .

In our lead article this week, Bert Hofman provides an analysis of China’s demographic problem and options for policymakers. On the question of the impact of population on growth, Hofman notes that the Chinese workforce has been shrinking for years, that demography no longer contributes to the economic outlook and that labor productivity gains are generated by better academic results and technological advancements. He also says that, if needed, more workers could be mobilized by raising the retirement age – currently 60 for men, 55 for women – and wonders if technological advances will make it easier to care for. seniors.

What matters for the standard of living is not the size of the total population but its structure. The dependency ratio is decisive: the number of dependents (below and above the working-age population) in relation to the working-age population. As the working-age population peaked, the dependency ratio increased rapidly. Raising the retirement age will change this ratio overnight (by reducing the numerator and increasing the denominator), but only beats the demographic trend in time.

Although Hofman acknowledges that pensions will significantly increase fiscal pressures, especially if currently paltry rural pensions are brought into line with urban standards, he sees no evidence that the gradual decline in China’s population will take China off course. current economic growth – at least not for the next two decades.

China’s own policymakers, however, clearly want more births. And, given census data and population forecasts, it’s hard to imagine that a limit of “three children” will stick around for long. Whatever Chinese policymakers decide to do, the changes will almost certainly be gradual. Although analysts in China and abroad generally agree that removing all restrictions on family planning would have little or no impact on the birth rate, the complete abandonment of birth controls could be an embarrassment for the government. Chinese Communist Party. It would make a mockery of one of his iconic Reform-era policies (the collective responsibility of citizens for birth control was enshrined in the Constitution in 1982), and leave many wondering why the state invaded their country. privacy in the first place.

Long-term economic growth depends on three Ps: population, participation and productivity. China will join over the next decade its neighbors in Northeast Asia and many other wealthy countries with shrinking populations. Increasing the number of those participating in the workforce will help. And as Paul Krugman said, “Productivity is not everything, but, in the long run, it’s almost everything”.

The EAF Editorial Board is located at the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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