China’s 3-child policy may not help its declining birth rate. Here's why

Updated on Jun 01, 2021 08:39 AM IST

China’s surprise decision to allow all couples to have a third child may be too little too late to reverse the nation’s declining birthrate and shrinking workforce.

An elderly man plays with children near a commercial office building in Beijing on May 10, 2021. (AP)
An elderly man plays with children near a commercial office building in Beijing on May 10, 2021. (AP)
Bloomberg |

China’s surprise decision to allow all couples to have a third child may be too little too late to reverse the nation’s declining birthrate and shrinking workforce.

Economists and demographers say authorities will need a range of supportive policies on childcare and measures to curb high education and housing costs to make it viable for couples to expand their families.

China has been gradually reforming its stringent birth policy that for decades limited most families to having only a single child. In 2016, couples were allowed to have a second baby, although that did little to boost the birthrate. In a meeting presided over by President Xi Jinping on Monday, the Communist Party’s Politburo agreed to ease the current two-child restriction and also raise the retirement age in a bid to boost the labor force.​

Also read: China allows 3 children in landmark volte-face

“It is an important policy move, but the three-children policy alone will not lead to a sustained rebound in the fertility rate,” said Yuan Xin, a professor at Nankai University in Tianjin. “A whole package of services and polices, such as childcare, tax-rebates for parents, housing subsidies and even gender equality, are needed to create a social environment that encourages parents to have more babies.”

Some government officials, including researchers at China’s central bank, have called for birth limits to be abolished entirely. The debate was intensified after the results of China’s latest national census earlier this month showing a decline in the country’s working-age population over the last decade.

The declining birthrate means China’s population, currently at 1.41 billion, may begin to shrink before 2025, according to Bloomberg Economics estimates. There were 12 million new babies born last year amid the uncertainties of the coronavirus pandemic, the lowest number since 1961.

Yuan of Nankai University said a fertility rate of 1.8 is ideal for healthy population growth. The rate is currently at 1.3.

Also read: China’s three-child policy is an admission of failure

China’s fertility rate began a steady decline from the 1970s, as education levels increased and the government encouraged rural women to have fewer children, culminating in the national “one child” policy which applied to most women from the end of that decade. The rules were often harshly enforced, especially in countryside areas where officials sometimes ordered women to have abortions.

What Bloomberg Economics Says...

China’s new three-child policy is a step in the right direction but it’s not enough to head off an inevitable demographic drag on the economy. Other steps, including birth- and parenting-friendly policies and an increase in the pension age, are needed as quickly as possible if China stands a chance of slowing a looming decline in its workforce and crunch from an aging population.

Eric Zhu, China economist

A lower birthrate and bigger elderly population is putting pressure on the economy and government resources. To maintain economic growth, Beijing will need to rapidly increase spending on pensions and health care while maintaining a high level of corporate and state investment in order to upgrade its vast industrial sector and increase education levels, according to economists.

“A comprehensive policy package ranging from tax incentives, education and housing subsidies, more generous maternity leave, universal provision of child care” is needed for the three-child policy to be effective, said Liu Li-Gang, managing director and chief China economist at Citigroup Inc. The government will need to rebuild the social safety net, as well as contain housing prices and reduce education costs, he said.

China has maintained rapid economic growth in recent decades despite its slow population growth, with migration to cities propelling a shift from agriculture to factory and service work, which increased economic output per worker. The current proportion of people living in urban areas of about 64% is roughly on par with the US in 1950, suggesting potential for further catch-up.

Policy Mix

To help sustain growth, China is looking to raising the retirement age, one of the lowest in the world, and increase urbanization. The government is aiming to gradually lift the retirement age from the current level of 60 years for men and as low as 50 for women, and plans for 50 million people to move permanently from rural to urban areas in the next five years to take up service and manufacturing jobs with higher wages.

The right mix of policies could mean China becomes the world’s largest economy, continuing to propel global demand for commodities in the coming decades, while its gray consumers become a vast market for multinationals, with a huge pool of pension savings targeted by global finance companies. A less effective response could mean China never overtakes the U.S. in terms of economic size, or does so only fleetingly.

The trend toward fewer births is likely to continue even with a looser birth policy. As in East Asia and Europe, preferences have shifted toward smaller families. A spike in births following the previous relaxation to allow most families to have two children was short-lived, with many parents citing the high costs of housing and education as a limiting factor.

“These days, few women or families opt to have three children,” said Herald van der Linde, head of equity strategy for Asia Pacific at HSBC Holdings Plc. “The issue is high childcare costs, employment discrimination against women in childbearing age, lack of childcare in the workplace etc. And all sorts of policies have been thrown at families to have more babies in other countries -- even cash handouts -- but often with little effect.”

Shares in Chinese companies related to infant care continued to rally Tuesday. Milk formula maker Beingmate Co. rose by as much as its daily limit of 10% for a second day in Shenzhen, while Jinfa Labi Maternity & Baby Articles Co. also climbed by 10%. Japan and Australia stocks also moved.

The policy change was quickly mocked on Chinese social media, with many people lamenting the fact that couples from single-child households would now have to raise three children while supporting four elderly parents and repay heavy mortgage debt. It also triggered concern over women’s employment, with some saying that it will become even harder for females to get a job as companies are unlikely to be willing to shoulder the costs.

“For those people who are rich, relaxing the policy will encourage them to have more children but for the common citizens, like the middle class or even the lower class, they don’t have enough incentive to make use of this new policy,” said Vivian Zhan, an associate professor of Chinese politics at the Chinese University of Hong Kong.

SHARE THIS ARTICLE ON
Topics
Close Story
QUICKREADS

Less time to read?

Try Quickreads

  • Monkeypox can spread by touching objects that have been contaminated by the disease's fluids or lesions as well as direct physical contact with the lesions.

    Monkeypox virus can stay on computer mouse, coffee machine for days: CDC study

    A new study on monkeypox by the US disease control body CDC now suggests that the virus can linger on many common household objects for several days despite regular disinfecting. For this study, a home shared by two monkeypox patients was taken up. Researchers found the virus in 70 per cent of high-contact areas 20 days after their symptoms began. These included couches, blankets, a coffee machine, computer mouse and the light switch.

  • The path of flight ET343 over Addis Ababa, as recorded by Flightradar24. When the plane overflew the runway, the autopilot disconnected, triggering an alarm, which finally woke the pilots, who then turned the plane around. (Courtesy: flightradar24)

    Ethiopian Airlines pilots fall asleep on flight, miss landing

    New Delhi: Pilots of an aircraft of Ethiopian Airlines fell asleep mid-air and missed landing at Ethiopia's capital Addis Ababa, commercial aviation news website Aviation Herald reported late on Thursday. The pilots were later suspended pending an investigation, according to news agency Bloomberg. The incident reportedly took place on Monday when the aircraft was flying from Sudan's Khartoum and was supposed to land at Bole Airport in Addis Ababa.

  • Michael Gove in a file photo. (Reuters)

    Ex-UK minister Michael Gove backs Rishi Sunak for next PM

    Former British cabinet minister Michael Gove on Friday endorsed Rishi Sunak for prime minister and announced an end of his frontline political career, he said in an op-ed in The Times. Gove wrote in the op-ed that he thinks Liz Truss' campaign for 10 Downing Street "has been a holiday from reality." Sunak has the right arguments as they come from his experience of being the chancellor during the COVID-19 pandemic, Gove added.

  • FILE - Armed al-Shabab fighters ride on pickup trucks as they prepare to travel into the city, just outside the capital Mogadishu, Somalia, Dec. 8, 2008.. (AP Photo/Farah Abdi Warsameh, File)

    Al-Shabaab attacks hotel in Somalia's Mogadishu, casualties reported

    Al-Shabaab fighters attacked a hotel in the Somali capital Mogadishu in a hail of gunfire and explosions on Friday, with casualties reported, security sources and witnesses said. The assault on the Hayat Hotel triggered a fierce gunfight between security forces and gunmen from the jihadist group who are still holed up inside the building, security official Abdukadir Hassan told AFP.

  • Sweden shopping centre shooting: Two injured, one arrested. (Getty Images)

    Sweden shopping centre shooting: Two injured, one arrested

    Swedish police said on Friday two people were injured in a shooting at the Emporia shopping centre in the southern city of Malmo and one suspect has been arrested. Read: Shooting selection policy set for a tweak again The police are on the scene questioning witnesses and going through material from surveillance cameras. Earlier, police said they had cordoned off the area and asked the public to avoid going to the shopping centre.

SHARE
Story Saved
×
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Saturday, August 20, 2022
Start 15 Days Free Trial Subscribe Now