A medical worker cares for a newborn baby lying in an incubator at Jingzhou Maternity & Child Healthcare Hospital on February 11, 2021, in the Chinese New Year, the year of the ox, on February 11, 2021 in Jingzhou, Hubei province, China.
Huang Zhigang | Visual China Group | Getty Images
BEIJING – China’s decades-old one-child policy has received renewed attention in recent weeks after authorities gave mixed signals as to whether they are closer to abolishing the limits on how many children people can have.
Authorities have in recent years reversed the controversial policy for one child to allow people to have two children. However, economists say other changes are needed to boost growth as births decline and China’s population ages rapidly.
“There are two ways to address this. One way is to relax the birth control, something (that) will help on the sidelines, but even if they fully relax the control (it is) probably difficult to reverse the tendency. times, “Zhiwei Zhang said. , Chief Economist at Pinpoint Asset Management.
“The other way to deal with it from an economic policy point of view is to make the industry more dependent on other sectors,” he said.
The Chinese economy relies heavily on industries such as manufacturing that require large amounts of cheap labor. But rising wages are making Chinese factories less attractive, while workers need higher skills to make the country more innovative.
The bigger problem for China is that an aging population is an existing issue: slower growth in labor productivity, said Alicia Garcia-Herrero, Natixis’ chief economist for Asia-Pacific. She looks at whether China will see more growth in capital-intensive sectors, driven more by investment in automation.
Births will fall by 15% in 2020
China introduced its one-child policy in the late 1970s in an effort to slow down an increase in its population. The country doubled, according to official figures, from more than 500 million people in the 1940s to more than 1 billion in the 1980s.
In the next 40 years, the population grew by only 40% – to 1.4 billion, more than four times that of the USA today.
I do not think that the relaxation of the birth policy can have a major economic impact, because the slow growth of the population has not been due to policy constraint over the last twenty years.
Dan Wang
chief economist, Hang Seng China.
Similar to other major economies, high housing and education costs in China have kept people from having children for the past few years.
Despite a change in 2016 that allows families to have two children, births dropped by 2020 for a fourth consecutive year and, according to the analysis of a public safety report, dropped by 15% to 10 million.
“Overall, I do not think that the relaxation of the birth policy can have a major economic impact, because the slow growth in the population has not been due to policy constraint over the last twenty years,” said Shanghai Dan Wang. chief economist at Hang Seng China.
According to her, the experience of other countries is the most effective policy for a country the size of China to welcome more migrants, but it will be an unlikely change in the short term.
Other options policymakers are already pursuing include raising the retirement age, increasing the skills of the existing workforce with more training and using more machines and artificial intelligence to replace people, Wang said.
Policy change is only a matter of time
The policy for one child received renewed attention last month when the National Health Commission released a statement investigating the economic benefits of removing birth defects in a north-eastern region. The area with three provinces, known as Dongbei, has struggled economically and has the lowest birth rates in the country.
Two days later, the commission issued another statement saying the news was not a test for the withdrawal of the family planning policy, despite many online speculations that it was.
But removing boundaries is probably only a matter of time, according to economists interviewed by CNBC.
Yi Fuxian, a critic of the one-child policy and author of the book ‘Big Country With an Empty Nest’, said he expected a decision by the end of the year, after China announced one-off census results in April.
Challenges of China’s aging population
The Chinese government has also said that implementing a strategy to respond to an aging population will be a priority for the next five-year plan, which will be officially approved at a parliamentary session starting this week.
Meanwhile, the generations born before the implementation of the one-child policy in the 1980s became an important segment. In the next ten years, 123.9 million more people will enter the age category of 55 years and older, according to Morgan Stanley the largest demographic increase among all age groups.
This demographic shift will pose its own economic demands, said Liu Xiangdong, deputy director of the economic research department at the China Center for International Economic Exchanges in Beijing.
Liu said more workers would be needed to care for the elderly, while retirement communities and other infrastructure adapted for an older population would see greater demand.