Can China Recharge Its Population Growth?

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Wharton's Marshall Meyer and Minyuan Zhao, and Penn Law's Jacques deLisle discuss China's efforts to grow its population.

China has recently redoubled its efforts to boost its population, using both carrot and stick. Some Chinese provinces are offering tax benefits, housing and education subsidies, and longer paternity and maternity leave to lift birth rates, according to a report in The New York Times. In some other provinces, abortion clinics face new restrictions, and it is becoming more difficult for women to access them. Chinese courts are joining the effort by trying to dissuade couples from divorcing, and enforcing cooling-off periods, as The Economist reports.

China had introduced its one-child policy in 1979, but relaxed it in two stages in 2013 and 2016. In recent years, the government has become worried that the country’s declining working-age population will not be able to adequately support economic growth or finance the pensions of its older demographic. China’s birth rate fell to 17.2 million in 2017 from 18.5 million in 2016, according to a Straits Times report. About a quarter of China’s population will be aged 60 or older by 2030, the report said.

But those efforts are colliding with social, cultural and economic barriers. For example, younger people, especially in urban areas, prefer to delay marriage and have no more than one child. Employers frown at women who are planning to have a second baby; doing so could mean a demotion or denial of a job. Also, real estate prices are rising, so larger families face higher housing costs.

Wharton management professors Marshall Meyer and Minyuan Zhao, and Jacques deLisle, a Penn Law professor and director of the university’s Center for East Asian Studies, discussed the challenges China is facing in growing its population on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.) Following are highlights from their discussion.

Why More Is Not Better

“You know how expensive it is to raise a child … nowadays,” said Zhao. “You cannot just [change policy] and expect people to have more children.” Women who have more than one child will likely face more discrimination in the job market, she added. For a long time, employers have preferred to hire women when their children are in elementary school, and they flinch at the prospect of an employee planning a second child.

“Chinese families tend to prepare their children’s home when they get married, and [having more children] just doubles or triples the burden.”–Minyuan Zhao

The cost of housing is also a big deterrent to having more children, Zhao said. “Chinese families tend to prepare their children’s home when they get married, and [having more children] just doubles or triples the burden,” she noted. The new policy of encouraging couples to have more children applies mostly to urban and coastal areas where the one-child policy was strictly implemented, and which happen to be relatively more expensive places to raise children, she added.

“There are all sorts of economic reasons for not having additional children, and some of it has also become habit,” said deLisle. “The people who are now of childbearing age grew up as single children. They’re not used to the idea that a family has multiple children.”

Pressures of an Aging Population

DeLisle noted that analysts have often cited China’s so-called “demographic dividend” — an acceleration of economic growth following a decline in birth and death rates. After the one-child policy came into effect in the 1970s, China saw its population of younger-age people decline. “So you had this big bulge of people who were in their prime working years,” he said. However, “now, life expectancy is longer, and that big generation is getting older and living longer.”

The younger generation would not relish the task of taking care of the aging population, especially if they have bigger responsibilities of their own, according to deLisle. “If they start having lots of kids, they’re suddenly going to be facing a double burden,” he said. “These are people who aren’t used to focusing on anyone other than themselves, [at least] among the affluent classes in the cities. That’s a really hard switch to make.”

China’s aging population issue is different from that of other more developed countries, like Japan, deLisle pointed out. “China is facing the problem of becoming gray before it becomes rich.”

Shifting Policy Pointers

In its bid to increase its birth rate, China has attempted to experiment with tax breaks and financial incentives like subsidies on housing and education, deLisle noted. He pointed also to propaganda efforts such as the recent release of a stamp showing three piglets, to mark the year of the pig. Last year was the year of the monkey, and the stamps pictured a monkey with only two baby monkeys, he said.

While the Chinese can live with propaganda, some are concerned about any steps the government might take to encourage people to have more children, deLisle noted. “The concern is: Are we going to start getting pressure? This was the system which did coerced sterilizations and coerced abortions to keep the population down. It’s been more benevolent than that [since then], but there are lots of signs of creeping authoritarianism of a severe kind again in China. People worry about where it may lead.”

“China is facing the problem of becoming gray before it becomes rich.”–Jacques deLisle

DeLisle also noted other subtle shifts: “Already we’re starting to see foot-dragging on granting divorces in the hopes that couples will stay together and maybe have kids,” he said. “You’re starting to see a few more hassles thrown up in terms of getting abortions.” He noted that China has long had “extremely free access to abortion,” and when people see “these little tweaks around the edges,” they worry that “it may come back to bite them.”

Unintended Consequences

Meyer saw “the law of unintended consequences” at work as well. What was once China’s population pyramid (a graphical distribution of various ages in a population, which forms a pyramid when there is growth) is not a pyramid today: “It looks more like a pagoda with a big bulge at the top,” he said. “That bulge at the top increases your dependency ratio,” or the ratio of people under ages 15 and over 64 to the working-age population aged between 15 and 64.

“When you ask people to have more children, and hypothetically they do, the dependency ratio goes up and throws a bit of a monkey wrench into economic development,” Meyer said. “Fifteen years later you might get your dividend payment. But in the meantime, it will actually slow your economic growth rates, which are already under strain.” China has been preparing for a decline in labor supply by investing in developing artificial intelligence and robotic technologies, Zhao added.

“The momentum issue is key here,” said deLisle. “We have a very small generation now in its childbearing years. Even if they go up to a 2.1 replacement rate or higher — now at 1.6 per woman — it takes a long time for that to build up a population.”

Impact of Gender Disparities

China has one of the world’s highest male-to-female ratios; it had 120 male births for every 100 female births in 2010, according to a United Nations-Nomura Global Economics chart. Zhao said that ratio is even more skewed in favor of men in China’s rural areas, “so a lot of men [in those regions] cannot find wives.”

Zhao noted that increasing numbers of women are finding white-collar jobs, and that trend is affecting marriage and fertility rates. These women tend to delay marriage because they don’t want to hurt their career prospects, she pointed out.

“When you ask people to have more children, and hypothetically they do, the dependency ratio goes up and throws a bit of a monkey wrench into economic development.”–Marshall Meyer

As women move up the career ladder, status becomes a factor in selecting a partner, further reducing marriage options. “Women in China, as in many places, are relatively reluctant to marry down in terms of socioeconomic status,” said deLisle.

Who Will Pay Down the Debt?

Meyer said that even while China moves away from labor-intensive industries, “its growth ultimately will depend on people power.” He set that against the backdrop of China’s efforts to balance its “massive debt overhang” and also its “massive overinvestment” in industries like steel. “Combine this overhang of debt and excess capital formation with a shrinking workforce and you’ve got a problem,” he added. “Who’s going to take care of that debt?”

According to Meyer, the big questions China faces are about how it will manage its debt and how it could make sure it makes the right investments. A scenario of a declining working-age population also raises questions about finding the required demand for housing, consumer goods and so forth, Zhao said.

“I’ve always thought that these lines would collide with one another at some point,” Meyer said. “The internal dynamics — demography on the one side and economic dynamics on the other side — will themselves converge to cause a real slowdown in China at some point, which may not be far ahead.”

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