Home Asia News Will China’s push to boost falling birth rates succeed?

Will China’s push to boost falling birth rates succeed?

China's declining birth rate
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Chinese authorities have been long worried about its population growth and are working hard to change the demographics of the world’s most populous country. To fix its declining birth rate problem following the one-child policy in the 1970s, China has now been encouraging couples to have more children.

As per the latest census released in May, China’s population in the decade to 2020 increased by a mere 5.38% to 1.41 billion, the lowest registered in almost six decades.

Moreover, China’s total fertility rate declined rapidly from 1.7 per woman in 2016 to 1.3 in 2020, with new births numbers shrinking for a fourth straight year to 12 million. Data by China’s National Health Commission (NHC) suggests that the number of babies born could drop even more – below the low of 11.97 million recorded in 1961.

Cai Fang, a member of the monetary policy committee of the People’s Bank of China (PBOC), told SCMP that China’s population is set to peak in just four years’ time and the country will experience negative growth after 2025. As per the PBOC study in April, the country should not interfere with people’s ability to have children or it will be too late to reverse the economic impact of a declining population.

According to Bloomberg Economics estimates, the declining birth rate means China’s population, currently at 1.41 billion may begin to shrink even before 2025. The United Nations has predicted that the number of people living in mainland China will peak in 2030 before declining.

China’s family policy in changing times

China had initiated to promote family planning in the 1970s and included it in the Constitution as a national policy in 1982. After implementing the strict one-child policy in the late 1970s, China loosened its policy in 2016, allowing couples to have two children. This was  a first response to the rapid slowdown in the growth rate of the population over the years.

But last year, the low birth rate problem worsened amid the uncertainties of the coronavirus pandemic as couples delayed plans for more children. Thus, China announced the three-child policy on 31 May 2021.

Loosening its strict policy further, the Chinese government in its July end announcement allowed families to have as many children as they like without facing fines or other consequences.

However, analysts do not expect the new policy to reverse the trend. “The causes of slower population growth are a complex interplay of many reasons, including demographic or cultural reasons, as well as higher housing and education costs in Tier-1 and some Tier-2 cities. In fact, the gradual introduction of the two-child policy in 2011-2015 only slightly moderated the drop in the natural increase rate in 2012-2016. The rate fell sharply in 2017-2020 as the two-child policy ran out of steam”, analysts from Fitch Ratings said in a July release.

On a similar note, rating agency Moody’s Investors Service said, “Although China’s new policy allowing couples to have up to three children could support fertility, it is unlikely to dramatically change the national birthrate, meaning that aging will remain a credit-negative constraint.”

Policy revisions, incentives to boost birthrates

In an unprecedented push for more childbirths in the world’s second-largest economy, central authorities plan to establish a comprehensive support system by 2025 that helps to “significantly reduce” burdens on couples related to the cost of childbirth, parenting, and education. Furthermore, the document released by the Communist Party of China Central Committee and the State Council stated that the reforms will also improve the “sex ratio, structure, and quality” of the Chinese population.

According to the July documents, the government will no longer charge a fine for couples or families violating the earlier one-child, and later two-child policies. In addition, the country also plans to allow tax deductions for expenses on children under the age of three, as a part of a major relaxation in child-bearing policy. It also called for better maternity leave and maternity insurance systems.

Furthermore, the government is also pushing stricter reforms on the country’s costly and competitive after-school private tutoring, make it cheaper for parents to raise children. Not only that, but authorities have also renewed efforts to ensure regulations on the property market and subsidized housing prices.

According to analyst Brian Freitas, the lack of affordable housing is one of the reasons for China’s birth rate dropping and there is now a renewed effort “to ensure that property prices do not continue to run-up.”

Also China’s local governments have unveiled various subsidies. China’s capital – Beijing – also announced that starting May 31, the city would offer an additional 30 days of parental leave on top of the standard 98 days for mothers giving birth to a third child. On a similar note, Panzhihua city in Southwest China’s Sichuan Province recently announced it plans to offer a subsidy of $76.87 per baby every month to couples giving birth to more than one child until the babies turn three.

Supporting child births alone, however, won’t help the economy shortterm. “As China continues its evolution toward a services-based economy, optimizing human talent is essential. Notably, the size of China’s workforce is no longer growing due to low birth rates and an aging population, so new sources of GDP growth will need to come from increased productivity among existing workers”, asset manager Matthews Asia wrote in a research piece. In order to increase productivity, “companies will have to work to streamline functions such as human resources or accounting”.