The world’s most populous country has a population problem. It’s shrinking.
It’s a serious issue with numerous social and economic ramifications, but there is irony as well. After China’s population boom in the 1950s to 1970s Mao era—nearly doubling in a generation—demographers realized the situation was untenable. Mao’s successor Deng Xiaoping in 1979 then implemented the one-child policy.
It’s this controversial change of course that is coming back to bite China. China saw a 15% decline in the number of newborns registered in 2020, according to the country’s Ministry of Public Security.
Alongside its aging population, that means it is on a path toward a declining workforce that will not be able to support pensions and other social programs.
“China’s falling fertility rate will accelerate population aging, a process which is already well under way and creating a headwind for growth as the size of the labor force continues to shrink in absolute terms,” Albert Park, head and chair professor at the Hong Kong University of Science and Technology, told Barron’s.
“China can address the growth challenges posed by population aging by relaxing its immigration policy, extending retirement age and investing more to make older workers more productive, establishing comprehensive healthcare and pension systems that support better health (and productivity) over the life cycle, and reduce the social costs of population aging, he said. China can also invest in infrastructure, innovation, and education that will support steady growth in productivity, he said.
China has not much budged on its notoriously stingy immigration policy, doling out a mere 1,576 “green cards” in 2016, the last year for which numbers are public. By contrast, the U.S. grants over 1 million each year.
As for the retirement age, China has yet to actually raise it but last year created a firestorm when it announced it would soon begin to do so “in a gradual manner,” without providing further details.
China relaxed the one-child policy in 2013 for some families and began allowing all families to have two children in 2016, in hopes of encouraging a baby boom. The results were underwhelming.
China last month released a proposal urging its northeastern provinces to study the possibility of completely abolishing limits on the number of children families can have. The region—China’s struggling rust belt—has the lowest fertility rates in the country. The study, authorities said, would inform a decision the National Health Commission would make for the region, and possibly the country, on abolishing birth restrictions.
China is experiencing what other rich countries have encountered. It’s widely known that as countries become wealthier, woman have fewer children. But other issues are at play. In 2019, China’s marriage hit its lowest rate in 14 years. The birthrate in 2019 was the lowest since modern China was founded in 1949.
The math seems not in China’s favor. It takes roughly two children per family to maintain a population level. China’s rate is currently 1.5.
But not all experts see the situation as so dire.
“I do not think at all about why the fertility rate is what it is, only about its impact on the future of the economy,” Barbara M. Fraumeni, a Special-Term Professor of the Central University for Economics and Finance in Beijing, told Barron’s.
“In future years, the contribution to economic growth of young Chinese as they enter the workforce is expected to increase relative to that of current working age individuals,” Fraumeni said, based on data she and colleagues have analyzed along with the China Center for Human Capital and Labor Market Research of the Central University of Finance and Economics.
Tanner Brown covers China for Barron’s and MarketWatch.
