China's two child policy
By Eithne Dodd | Nov 26 2015
Image credit: ChinaDialogueEithne Dodd examines the economic implications of China’s new two-child policy.China’s ruling Communist Party has announced the abandonment of the infamous one-child policy which has been in place in the country for more than thirty years. From March 2016, couples will be able to have two children before they face fines. The decision has been made to combat China’s ageing population, which the Communist Party fears will lead to a slowing of the growth rate of the economy. According to Credit Suisse calculations the removal of the one child policy would introduce 3-6 million more newborns each year from 2017. Those extra babies would cause an additional consumer spewing of between 120 and 140 billion yuan. In 1976, the then leader of China, Deng Xiaoping, introduced the idea of a one child policy, but it was never intended to last forever. China was a much poorer country at the time and it was feared that it would not be able to support the growth in population. It is estimated that around 400 million births have been prevented due to the programme since it began in 1979. While there were exceptions to the policy, such as among ethnic minorities or farmers whose first child was a girl, most couples who violated the law faced harsh punishments. These range from fines, loss of employment and forced abortions and sterilisations. “It is estimated that around 400 million births have been prevented due to the programme”
China’s labour force was at its peak in 2012 at 940 million people. Since then it has been falling and is forecast to fall by 29 million by 2020. The working-age population fell by 3.71 million last year. The UN estimates that the country will have almost 440 million over 60s by 2050. This will leave pensioners depending on a shrinking working population and will compromise China’s ability to keep a high growth rate and standard of living. Since the impact of the one-child policy there has also been gender imbalance in the country as male children are preferred over females. In 2014, Chinese women gave birth to 115.9 boys for every 100 girlsOver the past few years, many demographers have spoken out against the one-child policy including Yi Fuxian who said that if the fall in the working population is not reversed “The future of China’s economy will look grim.”Liang Zhongtang, a demographer from the Shanghai Academy of Social Science, said, “The core issue is not about one child or two children. It’s about reproductive freedom. It’s about basic human rights. In the past, the government failed to grasp the essence of the issue.”Zhongtang also said that even a two-child policy will not do enough to reverse the demographic changes already in place: “At the moment, many people are not willing to have more children, even if they are encouraged to do so. So in reality the government introducing the two-child policy still won’t have much of an impact.”“At the moment, many people are not willing to have more children, even if they are encouraged to do so. So in reality the government introducing the two-child policy still won’t have much of an impact.”
Zongtang may be right, especially when you consider that in 2013, the one-child policy was relaxed somewhat to allow married couples to have a second child if one of the parents was a single child. So far in Shanghai, less than five per cent of eligible couples have applied for permission to have a second child. Many believe that the change in China’s demographics will not be significant. Many couples may decide to have only one child as they have become the societal norm.In the last 35 years, the Chinese economy has grown substantially and as any country gets richer and more urbanised, the fertility rate declines. The new two-child policy is expected to have little effect on married couples as the financial cost of having two children are expected to growAny economist or demographer would say that the best way to curb population growth is by promoting economic growth and good infrastructure and China has not reached this stage yet. China’s labour force is shrinking as its population ages. This is also happening in Japan and Germany but unlike in China, they were rich before they got old. When Beijing announces its next five year plan it is expected that it will reduce its average annual growth rate from the seven per cent to six per cent. In the wider world, the abandonment of the one-child policy has revived the debate of population control and the strain an increased population will put on the planet’s resources. Most demographers believes that the world population will naturally stabilise this century at around 10 billion people. Major global regions are already moving towards fertility rates below the replacement threshold of 2.1 children per woman. The Chinese experiment shows that government intervention in population did not alleviate the pressure on the economy in the long run. China still needs to boost productivity and global innovation in order to expand its economy. It is an economy which will find it increasingly difficult to pay for itself due to its ageing population and low (although increasing) birth rate.