China's People Problem
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China's People Problem


On January 18th, the National Bureau of Statistics (NBS) announced that China’s working age population (ages 15-59) had declined in 2012 by 3.45 million, or 0.6 percent, marking the first decline in working population “in a considerable period of time.”

The head of NBS, Ma Jiantang, admitted: "I can't deny that I'm worried about this problem.” Indeed, the problem is perhaps more serious than originally thought. HSBC co-head of economics Frederic Neumann commented in the Financial Times, “Most projections . . . estimated that the decline in the working age population would start around the middle of this decade…but [the numbers] show it has already happened, which suggests the decline over the next few decades will be faster than expected.”  UN figures showed that China’s total population would start declining after 2030, a number that senior Communist Party officials are now revising to 2020, by which point the China Development Research Foundation estimates that the working age population will decrease by another 29 million.  

This means the end of the demographic dividend, which is a productive advantage brought about by a large labor force and a low dependency ratio–lower numbers of those not in the labor force vs. those in the labor force.   China has already begun to see the consequences of a smaller labor force and the end of the demographic dividend.  A number of provinces, especially those on the coast, have experienced labor shortages, and have even lobbied the central government to relax the one child policy to alleviate the crunch.  A smaller labor force could push even more manufacturing jobs to move to countries like Myanmar, Vietnam, the Philippines, and Indonesia, and a change in the dependency ratio poses a significant burden to a country in terms of health care costs (among other social service costs).  And China is certainly aging quickly: in 1982, the 60 and over population was 8 percent of the total–a number that has grown to 14.3 percent.   It is estimated that China's elderly population will hit 360 million by 2030, from about 200 million in 2013.

The decline of the working age population and the end of the demographic dividend are largely due to the one-child policy, introduced in 1979, and responsible for anywhere from 100 to 400 million less births.  It should be noted that it is not a “one child” policy across the board: second children are allowed for ethnic minorities, rural families whose first child is a girl and for parents who are both only children.  The one child policy has also led to a dramatic gender discrepancy: compared to the global average of 103-107 boys for every 100 girls, China’s figures are 118 boys for every 100 girls.

So is changing the one child policy the answer?  First of all, is there a political possibility that it could be changed?  On one hand, as Reuters has noted, departing president Hu Jintao excluded the phrase “maintain a low birth rate” in his November Communist Party congress work report (for the first time in a decade), indicating a possible openness to the idea among top leaders.  On the other hand, just before Ma’s announcement on behalf of the NBS, the National Population and Family Planning Commission issued firm pledges to uphold family planning at its annual conference, according to South China Morning Post.

Even if the one-child policy were changed, it would not be a silver bullet. On the most basic level, a change today would bear fruit in 15 years, when today’s babies join the labor force.  Additionally, there are a number of societal factors that would suppress the birth rate even if the policy was lifted, especially in urban areas.  For instance, the cost of education can be significant in China, as can medical expenses, which are largely not covered by the state. Children are expensive, and with elderly parents to take care of, less Chinese are willing to leverage their futures for bigger families.  In cities, there is also the issue of expensive real estate: one-bedroom apartments (already beyond the reach of many) are not conducive to multiple children. Finally, contraception is inexpensive and widely available, making it easy for women not to have children if they choose not to.

For a long term solution, lifting the policy is the right answer.  According to the Economist,   S. Philip Morgan of Duke University estimates that if all restriction were relaxed, the fertility rate would be approximately 1.62, not far above the current 1.47 rate.  So if the policy was to be eliminated, there is very little danger of a population explosion.  Instead, the population triangle, which is quickly becoming top-heavy, could get an assist at the bottom levels. 

More short term solutions are needed, solutions that would focus on adapting the economy to the new reality of slowing population growth and the ensuing transition away from a low-skill manufacturing economy.  For example, developing and supporting innovation, promoting a consumer-spending driven economy, and raising the workforce’s level of education.  Thus, ending the one child policy is just one piece of the puzzle: coping with these demographic changes will require China’s leaders adopt a comprehensive strategy.

Tom F
February 8, 2013 at 12:57

This story conveniently ignores the fact most Chinese do not aspire to work in factories or for the government. Most will own their own business, and most will work well beyond the working age of OECD countries. There are also increasing investments in automation and robotics. Labour requirements in China are quite different to the western world who has generally suffered decline in automation investments and are generally dependent on the services industry to maintain GDP growth.

February 7, 2013 at 03:33

Typical racist comments by the japanese above. Not surprising for sure. "92% of chinese families are poor"…pulled out of thin air as the middle class already exceeds 300 million people.

Samurai X
February 6, 2013 at 14:52

With the one child policy with no welfares or social security, one Chinese child is obligated to support two parents and four grandparents. If the family is wealthy, the child will be driving Mercedes. If the family is poor, like 92% of Chinese families are, all the living expenses from rents, health cares to groceries will be set upon his/her shoulder.
This will be effecting on morals of soldiers. None of young men wants to put their lives on stake due to their responsibility to the family's future. They will turn their backs as soon as bullets start flying around them. Chinese soldiers will be the weekest in the history of mankind.

February 5, 2013 at 05:39

The one child policy did not create the aging population problem by itself. China's fertility rate from 1970 to 1978 declined from 5.8 to 2.63 before the policy was implemented in 1979. The policy allows minorities, rural couples to have more than one child, while urban areas are only allowed 1 per family.  Even if the policy was never implemented in the first place, China would still be aging, but with a larger population. That means more elderly!
It took China's fertility rate to decline by over 50% in a span of 8 years from 1970 to 1978! 
Other reasons are financial. Skyrocketing property prices, inflation, costly health care, education fees, lower incomes compared to the cost of living, all contribute to the low fertility rate.  China does not need to pump out a baby boom to produce factory workers or street vendors.  Thats would be unsustainable. Also, nobody in China wants to work in factories anymore.

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