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Beyond the Two-Child Policy: Looming Population Crisis in China, the Underlying Cause, and Alternative Measures Could Be Taken

摘要: Although the “universal two-child policy” has been enacted in China for two years, statistics suggest birth rate remains sluggish. How come? What alternative measures could be taken?

(Chinese Version)

Although the “universal two-child policy” has been enacted in China for two years, statistics suggest birth rate remains sluggish. A total of only 17.23 million babies were born in 2017, registering a national birthrate of 12.43%. In fact, the actual number of newly-born babies was much lower than the lowest estimate by government officials (See Table One).

In response, People’s Daily issued an article titled “How to Awaken People’s Pregnancy Willingness?” and analyzed other countries’ measures against low birth rate. At the end of the article, it was emphasized that “population is the root of a country’s future”.

Why is low birth rate a sign of population crisis? What exactly does population crisis mean?

The worrisome low birth rate


Some people might take it for granted that since China’s population is so huge, low birth rate didn’t matter a great deal.

However, huge as China’s population base was, it was undergoing certain changes: ageing.

According to UN, in an ageing society, the number of elderly people aged 65 or older accounts for 7 per cent of the total population. Based on this definition, China qualified as an ageing society at the beginning of this century. Later on, the proportion of people aged 65 or older continued to grow and reached 10.8 per cent by 2016 (See Chart One).

In comparison, China’s young population is gradually shrinking. According to China Statistical Yearbook for the past few years, the proportion of people below 14 years old has dropped from 22.4 per cent in 2002 to 16.6 per cent in 2016 (See Chart Two). Based on China’s 2010 national population census, the population of post-80s, post-90s and post-00s reached 219 million, 188 million and 147 million, respectively. In other words, within less than a generation (three decades), the population of post-00s has dropped by 32 per cent compared with that of the post-80s. In a larger picture, when you compare China’s population growth with that of the rest of the world, you may find that China’s population has also been shrinking. Statistics suggest that the proportion of China’s population to world population in 1820, 1900, 1950 and 1980 was 36.6 per cent, 25.6 per cent, 21.8 per cent and 22.1 per cent, respectively. Although China’s population still accounts for 18.9 per cent of world population, China’s newly-born babies only take up 12 per cent of the world newly-born population. Worse still, this figure will continue to drop in the near future.

Based on the above facts, UNPD predicted in the latest World Population Prospects 2017 (revised) that China’s population will plummet by the mid of the century and China population growth will look like a reverse “V” throughout the century. Based on the low variant, China’s population will drop to 613 million by the end of the century, half among whom will be the elders (See Chart Three).

Pessimistic as it seems, the report should bring our attention to the problems of China’s population growth: the ageing population and the shrinking young population.

The main impacts of these two trends on people’s lives and national economy growth can be summarized in two aspects:

a) State pension might be underfunded when the younger generation ages

The huge gap in state pension has always been a headache for any society. In the current pension system, the young people are paying pensions to provide for not only the elderly today, but also themselves when they grow old. However, in practice, these pensions are far from enough. In other words, young people can’t expect much pension by then. Worse still, as the young population shrinks, fewer young people are paying the pension, which will exacerbate the vicious cycle.

b) The shrinking demographical dividend might undermine economic growth

It’s known that demographical dividend played a key role in China’s economic miracle. It was a massive labor force that paved the way for rapid economic development and wealth accumulation. However, since 2012, China’s working-age labor force (aged 15 to 59) began to decline, marking the Lewis Turning Point of China’s economic development and the end of demographical dividend. Around the same period, China’s economy has reached the “three period superimposed” and the “new common stage”. In the near future, the shrinking working-age population will put more pressure on economic growth. It was at this point that “the universal two-child policy” was enacted. However, does the loosened child control policy really work?

The high child-raising burden


On any account, the result is only partially satisfactory. Statistics suggest that the number of second child increased by 1.62 million than 2016 and reached 8.83 million in 2017, and that the proportion of second child in newly-born babies reached 51.2 per cent. From this aspect, the “universal second child policy” did work. However, the total number of newly-born babies, as well as total birth rate, as is mentioned above, both declined. In other words, although the number of second child is on the rise, the total number of newly-born babies is declining.

How come? More and more couples are not willing to have even one child.

Although some people pointed out that 2017 is the year of sheep in lunar calendar and babies born in this year might expect a poor life, and that this is the reason why some parents didn’t have babies in 2017 and why birth rate was low. However, this doesn’t really make any sense, since there are also a whole bunch of famous people who are born in the years of sheep.

Before we dive into any underlying cause, let’s start by talking about a mobile game that became popular in the internet world in mainland China almost overnight: Frog Travelling.

However, as the game went viral, some people came up jokes such as “it’s better to raise a frog than give birth to a child”. After all, compared with raising a child, you don’t need to worry about the frog much, while the frog will travel around the world, send postcards to you from time to time, read books, make friends and go to sleep, all by itself. There’s nothing more cozy than this.

When it comes to raising a child, it’s something really expensive, first of all, let alone the huge effort that might be involved. In fact, the high cost itself is enough to have many people step back at the idea of raising a child. People even came up with a joke to describe the huge burden of raising a child: when you decide to give birth to a child, you simultaneously give up the opportunity to be a millionaire.

Following, let’s do some simple match to see how much it roughly takes to raise a child (See Table Two):

In the above table, you can see basically how much it costs in different stages of raising a child, on average. However, this is at most the cost of a standard up-raising, and it might cost even more in other stages and aspects:

a) Further studies fee (around RMB 100,000 to 800,000). Since many kids nowadays will pursue further studies after college, parents will have to afford tuition fees for graduate studies or even overseas studies;

b) A house near favorable school district (over RMB 3 million). To give kids full access to quality educational resources, many parents will have to buy a house near favorable school district

c) Expenses to raise a second child (which doubles the expenses at every stage).

Some people might argue that it’s not necessary to spend so much every child, but when you take a closer look, you might find that education expenses take up almost a half. According to HSBC Liquid’s report “The Value of Education”, parents in mainland China rank the first around the world in terms of the emphasis on education for their kids. Therefore, few Chinese parents would dare to save educational expenses. After all, no parent would want their child to achieve something, and education seems to be the guarantee of a bright future.

In other words, since no Chinese parents dare to save the educational expenses, they do need to raise a certain amount of money before having a child.

It takes enough savings to raise a child


However, it’s no easy thing to raise enough money to provide the child with a decent up-raising.

Although many Chinese do earn a decent salary, they still have to tighten their belts and be careful before buying anything. As the buzzword goes, one might earn RMB 30,000 (around $ 4,743) a month, but still live in a way as if one earns RMB 3,000 (around $ 474) a month.

Although this might sound amazing, it’s indeed the way many young people live in major cities.

For the middle-class, even if they’ve already bought a house in major cities, they still have to bear the huge debt.

Take Beijing for an example, suppose you borrowed RMB 3 million (around $ 474,308) for thirty years to buy a house, you will have to pay back RMB 20,000 (around $ 3,162) every month. After you deduct the monthly mortgage and everyday expenses, you might find yourself with nothing much left. In this case, it’s hard even for a middle-class family to save up money.

In fact, some academic research also found that many Chinese family have no savings. According to the “China Household Finance Survey” conducted by Southwestern University of Finance and Economics, 10 per cent of high-saving family save 75 per cent of all savings, while 35 per cent of mid-saving family save 25 per cent of all savings. In other words, the rest 55 per cent of Chinese family have no savings at all.

What does it mean? Well, it means that half of Chinese family didn’t have enough money for any sudden risks or troubles, such as a serious disease, let alone giving birth and raising a child.

As a result, many young people have to work non-stop, try hard not to fall ill and do everything they could to avoid getting fired. Under such circumstances, how could they afford a child?

What alternative measures could be taken to improve birth rate?


It is worth noticing two more reasons behind the declining birth rate.

On the one hand, the changing population structure means that the number of women of child-bearing age is also declining. Specifically, the number of women of child-bearing age (15 to 49 years old) in 2017 dropped by 4 million than the year before, while the number of women of best child-bearing age (20 to 29 years old) in 2017 dropped by nearly 6 million. With the development of China’s economy and society, the first-marriage and first-birth age are both declining.

On the other hand, the rising divorce rate changes many professional women’s attitude on child-bearing. As more professional women put more emphasis on their career development, child up-bringing is more like a barrier. Therefore, child-bearing plans are often put off time and time again.

Therefore, China’s birth rate might continue to maintain at a low level in the near future. If no active measures are taken, what happens to today’s northern European countries and Greece will also happen to tomorrow’s China, though nobody would expect to see that coming.

Nevertheless, are there any effective measures to improve birth rate, beside the universal second-child policy?

Following are measures taken by some countries to achieve this goal (See Table Three). As a traditional Chinese saying goes, stones from other hills may serve to polish jade. So, it’s likely that we can learn from certain experience. However, nothing is better than what suits one best, so the specific conditions and development stages have to be taken into consideration before any decision is made.

From the above table, it’s not difficult to conclude that the core of most measures is to lower the burden and shoulder the cost.

On the one hand, appropriate measure should be taken to rid people of the long-standing impact of “one-child policy”; on the other hand, similar incentives should also be given to alleviate people’s fear of child-bearing. For example, to encourage families to give birth to new babies, mid and low-salary family should be given direct bonus, while mid and high-salary family should be given tax cut or subsidy.

Besides two-child policy, relevant measures should also be taken in areas such as education, health & medicine and social welfare, etc. to improve people’s willingness of child-bearing and raising as a whole.

Still, what can individuals do?

Well, it must have to do with improving one’s salary and accumulate one’s wealth as best as one could. Following are three aspects individuals could focus on to achieve these goals:

a) Improving professional skills in order to get a promotion;

b) Expanding income sources in order to find a second profession;

c) Learning to allocate assets appropriately in order to increase wealth.

One thing is for sure, as always: only by elevating oneself can one benefit other people as well as oneself.

………………………………… 

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The article is published with authorization from the author @Suning Finance Research Institute, please note source and hyperlink when reproduce.] 


  Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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