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Home / Opinion / China and the World Roundtable

Economies need to rein in population risks

By Zhang Jun | China Daily | Updated: 2021-05-10 07:28
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MA XUEJING/CHINA DAILY

Editor's Note: Aging populations have far-reaching impacts on East Asian economies. In particular, China faces some serious demographic challenges. What should China do to overcome those challenges? Three experts share their views on the issue with China Daily.

Historically, demographics have been a slow-moving variable. But the East Asian economies-especially China, Japan, and the Republic of Korea-h(huán)ave flipped so fast from rapid population growth to decline that they practically have whiplash.

As a planned economy, China was once obsessed with expanding its population. But, in 1957, economist Ma Yinchu published The New Theory of Population and cautioned that this trend would soon begin to undermine China's economic development. Though the government initially criticized his theory, Chinese leaders eventually took his warnings to heart, encouraging family planning as a way to promote economic growth.

In 1973, China went a step further, with the national wan, xi, shao ("late marriage, longer spacing, and fewer children") campaign, which encouraged couples to have no more than two children. Six years later, this changed into the one-child policy. To ensure its long-term impact, family planning was finally written into China's Constitution in 1982.

The fertility rate plummeted. By the mid-1980s, it hovered above the so-called substitution level of 2.1, compared with 6.0 in the 1960s and 1970s. In the 1990s, the fertility rate fell to just 1.2-1.3-a level that promised to hasten the country's demographic aging significantly. The government nonetheless continued to enforce the one-child policy until 2016, when it allowed all couples to have two children.

With that, China's fertility rate bounced back somewhat, reaching 1.58 in 2017, according to the National Bureau of Statistics. But it is back on a downward slide, falling from 1.49 in 2018 to 1.47 in 2019. According to population economist James Liang, it may be set to return to the 1990s levels.

As Liang said, in 2017, the total fertility rate of 1.58 reflected a fertility rate of 0.67 for one-child families, 0.81 for two-child families, and 0.11 for three-child families. The fact that the fertility rate of two-child families is higher than that of one-child families reflects the two-child "accumulation effect"-that is, one-child families that had previously wanted to have a second child finally being able to have one. Before long, that effect will dissipate, and the total fertility rate will quickly drop to 1.2, putting China in the same position as the ROK and Singapore, and possibly behind the United States.

This view is supported by pre-2016 birth trends. In 2010, the one-child birth rate stood at 0.73. While it increased slightly in 2011-13, it fell to 0.72 in 2014 and 0.56 in 2015. Given that one child was always allowed, the vast majority would have been registered, meaning that these fertility rate figures for one-child families are unlikely to be underestimates.

Overall, there have been fewer than 18 million births annually over the last decade, compared with 25-30 million during the peak years. In 2019, China registered only 14.65 million newborns. Last year, that figure dropped to 10.03 million-a year-on-year decline of nearly 15 percent. Although the sharp decline in births in 2020 might reflect the impact of the novel coronavirus pandemic, the downward trend is clear.

China's rapidly declining fertility reflects the legacy of family planning policies. They are also increasingly driven by rapid, sustained urbanization, universal education, and economic development-factors that are known to contribute to significant declines in birth rates.

This was certainly the case in Japan, whose rise to advanced economy status was followed by a sharp drop in fertility. In 1995, however, the birth rate dropped below 1.5. A decade later, it stood at 1.26. Policies to encourage childbirth subsequently helped increase the fertility rate, but only to 1.4, where it remains today.

The ROK is doing even worse. Although the ROK authorities have tried to encourage people to have more children, the country's fertility rate hovered around 1.0 in 2017-18, before dropping to 0.84 last year-the world's lowest.

As is true in Japan, the ROK's low fertility rate can be explained largely by economic factors. With rapid growth and large-scale urbanization driving up housing, education and health-care costs, couples are less willing to have children. This implies serious risks, beginning with a rapidly growing old-age dependency ratio.

In China, the working-age population has shrunk by some 3.4 million per year over the last decade. Those who are joining the workforce today were largely born when the fertility rate was already below the replacement level. And with life expectancy increasing, the share of China's elderly population (aged 60 or above) increased from 10.45 percent in 2005 to 14.7 percent in 2013, and to 18.1 percent in 2019. Today, there are more elderly people in China than children (aged 15 years or below). And by 2050, the number of elderly in China is expected to nearly double, from 254 million today to almost 500 million.

These trends will significantly undermine the potential output growth of the Chinese economy, owing to decreased labor force participation, and put tremendous pressure on public budgets, as outlays for pensions and social security far exceed income payroll-tax revenues. This is already happening in both Japan and the ROK.

China has always been cautious about loosening family planning rules. But if it is to sustain its economic dynamism in the decades to come, it must work hard to expand its labor force, including by raising the retirement age and encouraging families to have more children. Otherwise, its population will become old in the same way Ernest Hemingway described.

The views don't necessarily reflect those of China Daily.

The author is the dean of the School of Economics at Fudan University and director of the China Center for Economic Studies, a Shanghai-based think tank. Project Syndicate

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