SEAN TAN analyzes the 3 potential impacts of declining birthrates on China’s growth trajectory, and possible solutions to tackle this issue.
In the 1980s, the Chinese Communist Party (CCP) issued posters as part of its one-child policy which claimed, “Villagers who want to get rich: have fewer children but grow more trees”. Whilst this succeeded in curbing overpopulation, it was ultimately too successful. Forty years on, China is plagued with an aging population, which will cripple the economy if left unresolved.
Low fertility rates will stunt China’s growth in three ways. Firstly, and arguably most importantly, they will lead to a shrinking working population, the effect of which is exacerbated by the nation’s reliance on labor-intensive manufacturing, an industry that made up 32.6% of GDP in 2021. Since many Chinese businesses will also struggle to offset the labor shortage with automation due to extensive upfront costs and time delays in implementation, they will have to raise salaries in order to retain their workers. Companies will raise the price of their products to offset these expenses, which will result in cost-push inflation. Some firms will be unwilling to pass down costs onto consumers, as this would diminish their competitiveness, and may instead prefer to manufacture elsewhere. Indeed, a survey conducted by Gartner revealed that a third of corporations, including Apple and Samsung, plan on moving operations to neighboring countries by 2023.
Secondly, lower fertility rates will result in the overall population becoming older, resulting in more demand for healthcare spending, since the average person over 65 spends 7.25 times more on their wellbeing than someone under 25 does. Not only will this force the CCP to prioritize funding health services over stimulating economic growth, but the onus of looking after senior citizens will also fall on the general population. This may leave families cash-strapped, as 24% of Chinese citizens already spend above a tenth of their income on healthcare, compared to 4% of Americans. Moreover, young people may sacrifice work to take care of older relatives, and over two-thirds of them are reportedly struggling to balance these two duties. To make matters worse, the CCP has barely helped them, with the state’s pension system only covering 70.7% of China’s aged population and less than 3% of them being able to afford care at a nursing home, and potential solutions are unlikely to be implemented soon because they would drastically increase government debt. A CCP policy response would be futile anyway, because over 70% of children insist that they would obey the traditional Chinese practice of looking after their parents themselves.
Falling fertility rates will also be accompanied by an increase in the number of only children, which can actually decrease China’s productivity. This is because only children tend to possess more negative personality traits than children with siblings, according to a study by Xin Meng of the Australian National University in Canberra. Since only children are usually looked after by six doting parents and grandparents, they become used to being the center of attention and having everything that they want. When these only children become adults, they might demand higher wages and less overtime as well, which would decrease businesses’ profit margins. In addition, they may avoid harsh working conditions altogether by choosing to work in industries with better ones, which would induce a labour shortage in sectors such as manufacturing.
Furthermore, the increased attention from relatives might put more pressure on children to excel, which has been a leading cause of the depression and anxiety that affects 95 million Chinese adults. These conditions will significantly decrease economic growth because they have increased overall Chinese healthcare costs by 16%, and reduced productivity by a staggering 35%. The fact that parents only need to look after one child means that they are less likely to stress the need for cooperation with others, and this may mean that only children collaborate poorly with their co-workers. These traits have become so widespread that health services in large cities have introduced therapy programs specifically targeted to reduce their prevalence. This has stretched the CCP’s budget further; for example, a three-month program designed to cure this ‘little emperor’ syndrome in Guangzhou costs $4,000 per child.
How, then, can China solve its population crisis? It must first convince more people to get married. The skewed sex ratio (there are 106.3 males for every 100 females, compared with a global proportion of 101.8 to 100 respectively) make it relatively challenging to find a partner. The CCP could thus organise events for young people to meet, which would be more popular than unofficial matchmaking websites, which have few regulations to protect users from catfishing.
Poorer men are also often deterred from getting married by the societal expectation that they need to buy property before proposing, as over 80% of Chinese women see this as a crucial prerequisite. Therefore, the government could take steps to lower house prices by increasing supply, primarily by reversing policies such as the ‘three red lines’, which limit the borrowing capacity of real estate developers and have been responsible for the recent collapses of the behemoths Evergrande and Country Garden.
Furthermore, Chinese women in particular are skeptical of tying the knot, with over 41% of women not minding remaining single, compared to 20% of men. One of their main reasons for this is a fear of domestic abuse because many women feel that they are not protected by the law; nearly all abuse cases do not result in prosecutions, and many police officers refuse to intervene in abuse cases as they view them as mere ‘family matters’. To address this concern, the CCP could reform the justice and law-and-order systems accordingly, and also use education to denounce the stigmatization of women who speak out against their abusers and to reject the popular Confucian view that conjugal violence is a symbol of ‘patriarchal power’. If these fail, the CCP could allow unmarried women, in addition to the 45 million infertile women, to have children by lifting bans on assistive reproductive technology (including IVF and egg freezing), which it currently deems unethical.
However, raising the marriage rate is only half the solution; the CCP must also make it easier for couples to have children. 85% of mothers cannot afford to raise another child since they cost a staggering 6.9 times more than the GDP per capita, a larger ratio than that in developed countries such as the US, Germany, and France. This is because parents frequently spend extra tuition to keep their kids competitive in school, and the welfare state’s inadequacy makes it necessary for many of them to pay for private childcare. Subsidizing parenting through tax reductions and cash incentives will alleviate this burden, and although such schemes have been introduced in cities such as Wenzhou and Shenzhen, they should be rapidly extended to the whole of China. These grants could be cheaper than the CCP might expect, because even a small reward would make prospective parents more confident that childrearing is not a financially dangerous undertaking, especially if accompanied by an extensive propaganda campaign. For example, when a similar Japanese scheme was implemented in 2014, it raised the total birth rate from 1.42 to 1.46 within a year, despite only subsidizing ¥15,000 of the ¥260,000 that it costs monthly to raise a child.
Women are also dissuaded from childbearing because of pressure from employers, with 51% worrying that having children may prevent them from being hired, and that it may lead to income loss, demotion and even dismissal. To solve this, the CCP could improve enforcement of anti-discrimination laws and impose larger penalties on offending companies, who currently pay a mere few thousand yuan to their victims. Moreover, when employees have children, the government could cover managers’ expenses associated with hiring replacement workers and parental leave, and mitigate them by building more childcare centres, since these costs contribute to pregnancy-based discrimination.
All of these solutions may seem expensive, but increasing fertility rates would pay for itself many times over, since China’s large population directly contributed to the impetus behind its initial economic miracle under Deng Xiaoping. If China wants to be the global ‘number one’, being the first nation to remedy a declining population would be a good start.