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Why is China changing its family planning policy? Not One Any More

, December 3, 2015, 0 Comments

china-one-child-policy-marketexpress-inFor more than three decades, China followed the ‘one-child’ policy. Introduced in 1979, the policy was part of the overall strategy of economic transformation in China. The then Chinese birth rates were considered unsustainable in the long term. The Chinese state decided dis-incentivizing households would be the most effective way of stopping them from having more children. Accordingly, the second child for each couple was denied the state benefits of education, healthcare and childcare. Indeed, the second child ran the risk of not being formally recognized by the state agencies and therefore lacking the identification required for obtaining ‘hukous’, or residency permits that are probably the most important document for Chinese citizens. The long-term burden of the second child was in addition to the fines that parents had to pay for having the former.

The ‘one-child’ policy has had its share of controversies. Urban areas, like Beijing, witnessed the maximum impact of the policy where couples were strictly monitored. Rural areas with traditional inclination towards larger families resisted the policy. Rural households were actually able to extract a liberal edition of the policy by exploiting its inherent gender bias with rural families allowed a second child if the first-born was a girl. With urban families denied the liberty, bias for male offspring forced several abortions of girl fetuses. While these were the rough and dark sides of the measure, the strategy succeeded in rationalizing China’s birth rates and the size of its population. From around 150 per cent of the working age population (25-65 years) at the time of introduction of the policy, the proportion of young (up to 25 years) has dropped to around 50 per cent by 2015.

While bringing down birth rates and the additions to overall population, the ‘one child’ policy has also had significant other impacts on China’s demography. One of the important ones among these is the growth of a large ageing population. The elderly, i.e. sixty-five plus, are now more than 15 per cent of the working population with the ratio having steadily crept up from around 11 per cent in 1979. Apart from declining birth rates, better healthcare has contributed to longevities and a larger elderly population. Apart from the standard public policy challenges of managing an ageing population, primarily in terms of higher healthcare costs, what has also struck the Chinese policymakers is the rather rapid shrinkage in the proportion of the youth as part of the working age population.

The continuation of the trend will not only accelerate a negative net reproduction rate (NRR) where birth rates will drop below death rates contracting overall population, but will also reduce the flow of new entrants in the work force. The latter has particularly serious implications for China at a time when wage rates have begun going up for skilled labour and shortage of adequate skilled labour for many professions are becoming

Having declared the change, how successfully can China manage a reverse demographic transition? Global, and recent Chinese experience, does not reflect particularly bright prospects. Most advanced countries, as well as highly industrialized emerging markets like Japan, Korea and Singapore, have not had resounding success in increasing birth rates in spite of incentivizing more births. Demographic habits tend to stick among households and are arguably difficult to change.

Families are not necessarily enthused by the prospects of more fiscal incentives from more children as they tend to be perturbed by higher long-term costs of bringing up children. More importantly, for many couples preoccupied with careers and limited parental support, raising children is a major issue. Couples separated across long distances – a common feature in urban China – are also a deterrent to having more children.

Contemporary demographic habits and household preferences might constrain the takeoff of birth rates in China notwithstanding an official amendment of the earlier policy. Indeed, relaxations of the policy in the recent past, like allowing couples, if either of whom were single children to have more than one children, did not create major ripples. If the earlier response was any indication, the new policy will certainly take time to make an impact on the population, particularly in the rural areas.

The household responses to the policy would also be governed by the fact that for the first time in many years China’s economic growth has slowed and is unlikely to pull back to its earlier level soon enough as Chinese authorities are unwilling to ‘fund’ growth through additional stimuli. Rational assessments of medium-term economic outlooks do not make more children particularly appealing for even rural Chinese families, who are not interested in having more hands on subsistence cultivation. On the contrary, the Chinese experience of rural-urban migration and the difficulties faced by rural migrants following cutback of low-cost export-oriented production, might force rural families to hold back from expanding family sizes till rural economies prosper. And it is difficult to say when that will happen.

Image Credit:”Chinese family with one child at Beihai Park, Beijing” by Daniel Case
This article appeared first in the Financial Express