China’s demographic crisis

In 2015, the 1979 policy allowing couples to only have one child was reversed. But the birth rate has continued to fall, which bodes ill for the economy and social stability. Simon Wilson reports.


Honey, I shrunk the kids: state propaganda is failing to raise the birth rate
(Image credit: Credit: Alain Le Garsmeur China Archive / Alamy Stock Photo)

What's happening?

China's birth rate is falling dramatically despite the loosening of its one-child policy in 2013 and its abolition in 2015. Since then, all families have been allowed to have a second child. But far fewer than expected are doing so. There was a one-off jump in births in 2016, to 17.9 million, from16.6 million the previous year. But in 2017 the figure fell back to 17.2 million.

And last year it slipped to just 15.2 million. That's the lowest number since 1961, and the lowest birth rate per head of population (around 12 per 1,000) since the People's Republic was founded in 1949. Yet the government had projected a sharp risein births to more than 20 million lastyear. The decline in births has raised fears of a brewing demographic crisis, with worrying implications for China's economy and society.

How did the one-child policy develop?

The world's biggest-ever experiment in population control was implemented because China's population had grown rapidly from around 540 million in 1949 to 940 million in 1976.

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Amid global fears of an overpopulation catastrophe, and with official projections suggesting a Chinese population of three to four billion by the 2060s, citizens were encouraged from 1970 onwards to marry later and have only two children. Then, in 1979, a policy limiting parents to just one child was introduced, though it was modified in 1984 to allow rural parents a second child if their first one was a girl.

Did it work?

The rate of population growth in China slowed dramatically from 1990 (while still rising overall from about 1.2 billion to about 1.4 billion now). Some studies reckon the policy prevented up to 500 million births. But since it's impossible to say what would have happened without the one-child policy, we can't quantify its "success".

Some demographers reckon that China's population growth would have moderated from the 1980s onwards anyway (a typical pattern for poor countries as they get richer). And the figures do not convey the terrible human cost of the policy: women subjected to forced sterilisations or abortions; newborn girls killed by the state; and today's excess of men, with all its associated potential for social instability and individual suffering.

Why is the birth rate not rising now?

China is a far more urban, rich, and better-educated society than it was in the 1980s. Women marry later and far more are in paid employment. All these factors are associated with a lower fertility rate. Moreover, years of being told that one child is the ideal have created a new social norm. Many parents cite the cost of housing as their main reason for sticking at one. Many more highlight the extreme pressure on finances and quality of life of preparing their child for life in an ultra-competitive society.

And couples from the generation of "Little Emperors" (spoilt singletons) know that in future years they may have to find the money to support all four parents and in-laws in old age, making them unwilling to take on a second child now. All of this means that the fertility rate is unlikely to rise from its current 1.6 (children born per woman) far below the 2.1 needed to maintain a steady population.

What does this mean for China?

It means that its population will peak and start to decline rather earlier than anticipated namely at about 1.44 billion in 2029 (on current official projections). But more significantly, the age profile of the population is set to change radically and become rather like Japan's today. In 2015, 67% of China's population was aged 15-59, and just 16% were aged 60-plus. That's more than four people of (broadly) working age for each pensioner.

But by 2050 (on figures from demographers at Renmin University), the proportion of people aged 60-plus will balloon to 34%, while the proportion of working age people will fall to 51%. That makes just 1.5 workers per pensioner. That kind of swift turnaround has potentially disastrous repercussions for the economy and for social stability.

China is attempting to take action. Across the country, provincial governments have launched a welter of subsidies, propaganda initiatives, and more generous maternity leave, all aimed at encouraging women to have more children. Several provinces have banned abortions after 14 weeks. And some provinces have introduced new obstacles to obtaining a divorce. But few experts expect any of this to have much effect. If people don't want to have children, they won't.

What are the economic impacts?

According to Wang Feng, an academic demographer at the University of California Irvine, population trends (and the fast-shrinking working-age population) will cut Chinese GDP by 0.5% annually for the next few decades. With growth of 6%, a fall of half a point doesn't sound too disastrous.

But as Chinese growth trends lower, that 0.5% chunk will become ever more significant putting immense strain on the ability of the state to meet its current obligations, not to mention the rising expectations of its citizens. Wang Fengand fellow academic Yong Cai estimate that China's spending on education,healthcare and pensions jumped from 6.3% of GDP in 2007 to 11.6% in 2016 a faster rise than for military or security spending. They calculate that even at current levels of welfare benefits, the ageing population means that spending will need to double to 23% of GDP by 2050.

And if Beijing wanted to meet its stated target of increasing welfare spending in line with high-income countries, social spending would account for 32% of GDP by 2050. Such a giant leap appears all but impossible, especially as growth normalises. But without it, there's almost certainly trouble ahead.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.