China’s economy needs workers but its three-child policy may not fix the problem

The change in policy to allow couples to have three kids rather than two — announced Monday — is intended to improve China’s “demographic structure,” deal with an aging population and maintain “abundant human resources” for the world’s second biggest economy, according to state-run Xinhua news agency.

The move is a huge shift for China, which only relaxed its long-standing one-child policy six years ago.

But the pressure has been building since then, and just weeks ago China reported an alarming decline in its labor force that economists warned could cap economic growth. Recent census data showed that China’s population is growing at its slowest rate in decades, while the number of people aged between 15 and 59 dropped below 900 million to about 63% of the population in 2020 — down some 7 percentage points from a decade earlier.

Experts have said China’s labor force will peak in the next few years before shrinking by about 5% over the next decade.

“The demographic dividend that propelled the country’s economic rise over recent decades is set to dissipate quickly,” said Yue Su, an economist at the Economist Intelligence Unit in London, in remarks published earlier this month.

That could mean trouble for the big economic policy objectives set by President Xi Jinping. He has laid out ambitions for China’s GDP to double by 2035.

And while some forecasters say China could surpass the United States as the world’s biggest economy by the end of this decade, it has a much bigger gap to close in terms of prosperity. China’s per capita GDP stands at $17,000, compared with a US figure of more than $63,000, according to the International Monetary Fund.

China introduced its one-child policy more than 40 years ago to address overpopulation and alleviate poverty. But as the population aged, Beijing started loosening its policies, and in 2015 announced that it would relax the restrictions to allow up to two children per family.
Now the government is easing up even more — but simply telling people they’re allowed to have more kids may on its own not be enough to address the demographic crisis. China’s birth rate fell by almost 15% year-on-year in 2020, and some people have indicated that the rising cost of living is a major deterrent to having larger families.

There was a notable lack of enthusiasm on Chinese social media in the wake of Monday’s announcement. Reasons for not wanting to have a third child — or any child, for that matter — were among the hottest trending topics on Weibo, a Twitter-like social media platform in China.

“It’s mainly because I feel tired,” one Weibo user wrote. “How can I afford having a child when the pressure in life is so high?”

Xinhua asked Weibo users whether they were ready for a third child. The online survey attracted more than 30,000 responses within half an hour, more than 90% of which voted “absolutely not considering.” The survey was quietly removed.

“Barring other measures to encourage fertility, further liberalization of birth limits might provide only limited help to birth rates and overall population growth in China,” analysts at Goldman Sachs wrote in a research note last week. “The population in China appears likely to peak in the next five years with the working age population continuing to decline.”

— Ben Westcott contributed to this report.

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