Why China’s new economic blueprint needs to address the country’s demographic challenges
- The country has found out the hard way that the real problem was not runaway population growth, but an uncontrollable decline
The last major meeting to discuss China’s long-term economic planning, namely the third plenum of the 18th Central Committee of the Chinese Communist Party held in November 2013, is remembered not only for its pro-market reform blueprint, but also as a turning point in China’s population policy.
In the policy blueprint from that meeting, leaders decided to call an end to the country’s one-child policy. It was decided that a couple could have a second child provided either parent was an only child. This was a limited relaxation, but it marked a watershed moment in China’s population policy as draconian birth controls had finally come to an end.
This was followed by other two steps – a “full” two-child policy in 2015 and a “three-child policy” in 2021. China’s family planning law stipulates that couples can have three kids. But in reality, Chinese couples are encouraged to disregard the birth limit and can have as many children as they want. An administrative system designed to punish “unplanned” births has been totally abolished.
The government will no longer levy hefty fines on those who refuse to control the number of kids. Chinese film director Zhang Yimou’s US$1 million fine in 2013 for violating birth policy was the last well-known example. Sterilisation is not banned but requires medical proof that it is a necessary procedure.
But the measures failed to lift China’s birth rate. In 2014, the country had 16.87 million births. In 2023, that number dropped to 9.02 million, and the number could be similar, if not lower, this year given the country’s weak economic situation. There’s a growing recognition in China that it is facing a “grey rhino” problem when it comes to population, with a shrinking labour force, plummeting births and rapidly ageing population. The economic implications from these changes will be massive.
The lessons are clear to see from China’s family planning policies. The country has found out the hard way that the real problem was not runaway population growth, but an uncontrollable decline. After nearly four decades of mobilising the state’s resources to curb births, the government is facing a new daunting task of encouraging births.
Many local governments have started taking initiatives to encourage births, including lower down payments for home purchases by families with more than one child, while some Chinese companies have volunteered to shoulder “social responsibility” by encouraging births among their employees. China’s online travel agency Trip.com, for instance, has a policy of providing an annual 10,000 yuan (US$1,375) subsidy for each new birth among employees, payable for five consecutive years. But from the nationwide perspective, there is still little policy designed to confront the problem.
The third plenum of the 20th Central Committee this month offers a chance to address the problem using a “top down” approach. First of all, China has to phase out all regulations, institutions and even advisers who are closely associated with birth controls. For example, China’s “three-child” policy has become redundant because the “three” is meaningless – it is neither the upper limit nor the lower limit.
Secondly, big changes need to be made to the country’s state pension and healthcare systems to serve a rapidly ageing society. While China has built up a basic welfare state with extensive coverage, the system is very fragmented and unfair for many. For example, many migrant workers from the countryside who have worked for years or even decades in Chinese cities are still not entitled to a proper pension. The Chinese government must allocate a lot more resources to look after its ageing population.
The long-term solution for China’s demographic problem is to achieve a fertility rate of 2.1 to maintain a steady population. This means making systemic changes to policy and social settings to create a “birth friendly” society. On one hand, the Chinese government has to assign financial resources to every newborn, such as nationwide subsidies, but on the other hand, it has to re-engineer social perceptions and beliefs about marriage, birth and family – a task that can take decades to achieve results.
