Falling birthrate — China’s ‘birth pangs’

Anil Kumar Kanungo | Updated on June 24, 2021

Economic repercussions   -  Bloomberg

The latest Census in China has sent alarm signals and has led to major changes in family planning policies

Overpopulous countries like China and India always face dilemma over family planning. Governments in two countries sometimes see population growth as key productivity driver and other times see it as a burden. China’s seventh population census announced in May 2021 has highlighted that family planning followed in last four decades has been faulty and non-futuristic as productivity, it anticipates, will dwindle.

China’s labour-intensive manufacturing during last four decades enjoyed competitiveness and comparative advantage due to its cheap labour cost and abundant population. This was engineered during Mao’s regime, who believed population to be a strength for the then fledgling economy. This of course had drawn a lot of support from the liberal and modernisation policies of the Deng era.

But around mid-1980s Deng and the Chinese government saw a rising population as a drag on the economy. Since then, China followed the ‘one-child policy’ designed to ensure that population growth did not outpace economic growth. From 1980 new rules set limits for births.

Urban workers were limited to one child per family but were often able to apply for permission for a second child if their first was a girl. Rural residents were generally permitted two children and ethnic minorities were often permitted three or more. Although the one-child limit was only strictly applied in cities, the enforcement of birth limits everywhere was harsh. So these policies were considered draconian in nature and evoked considerable controversy.

The recent population census has made the Chinese leadership realise how flawed their population policies were and is trying to change the course.

Chinese population, according to the census, is around 1.41 billion plus indicates that population growth has slowed down by 0.53 per cent compared to last two decades (National Statistics Bureau of China). Labour force as a result has shrunk. Nearly two-thirds of people in China aged 35 and above who were laid off in March 2020 were still looking for jobs in September 2020.

Covid-19 has worsened the situation. China is currently witnessing a large greying population at almost 18.1 per cent (Statista) and incomes meant to go into pension coffers to support welfare policies is also shrinking. As an ageing population has serious repercussions for the economy, it will become a major challenge for the Chinese leadership to frame appropriate public policies on health care and economic welfare in the years to come.

Alarmed over an ageing population and shrinking workforce, China’s policymakers have in recent years relaxed the restrictions. The central government abolished the one-child rule in 2015, allowing all married couples to have two children. After the Census results, couples are now advised to have three children.

So far, the policy changes have done little to encourage rise in birth rates. Many Chinese families choose to have only one child because the perceived costs of raising children are too high. Many women are finding it difficult to maintain work life balance. Job security is also a factor after the Covid’s severe blow on the global economy.

So how can the Chinese policymakers deal with the situation?

Some policymakers argue that if China has to retain its ‘factory of the world’ tag, the population growth with innovative low-end skills and techniques is still paramount. China can still be a large supplier of consumer goods to low-income countries.

Analysts also believe that if birth rates do not rise, China may remain caught in a middle-income trap, as China is currently classified as a middle-middle income country. Its elevation to the higher income bracket will depend on more birth rates with high educational and technological skills.

With the ‘one child policy’, China’s productivity has seen a decline. Analysts fear that a greying population will place a huge burden on younger people and China’s fiscal resources. From the geopolitical perspective, analysts feel that an ageing population could even affect China’s superpower status. The US can attract migration whereas China may not.

Policymaker also opine that a huge population and a big market attracts MNCs and foreign investors. So a falling birth rate may affect foreign investments.

Another option which the policymakers may consider is to increase the retirement age to beyond 60 for men and women which is currently 60 for men and 55 for women.

Whatever policy China pursues in future, a big population is now considered beneficial for the economy. But it is hard to imagine that a ‘three-child’ limit will remain for long.

The writer is currently Professor, Lal Bahadur Shastri Institute of Management, and former senior faculty, IIFT Delhi

Published on June 24, 2021

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