China’s new three-child policy won’t fix its economy – but it could change lives | Stuart Gietel-Basten

A number of unsurprising things have recently happened in the country with the most famous population policies in the world. Firstly, the Chinese census in May showed that the country was ageing rapidly, its overall population growth was at its most sluggish in generations, and that its fertility rate had plunged to 1.3 children per woman – a level even lower than Japan, a country already in a state of population decline and very rapid ageing.

Of course, we have known this for many years. A more notable development was the media’s reaction to the census data. China’s apparent demographic travails were narrated as an existential threat to the country’s economic and geopolitical future. This led to panicked claims by commentators inside and outside China that it was experiencing a “demographic crisis”. Then came the suggestion from a high-profile former McKinsey consultant that the solution was to “go all out on pro-birth policies” by taking a “carrot and stick” approach, which included limiting access to better education to couples bearing two children – coercive ideas that arguably show a lack of regard for human dignity.

At the end of May, the government announced that the two-child policy would be further adjusted to allow all Chinese couples to have three children. In some ways, this was unsurprising. After the census results were announced, speculation increased about the scrapping of all birth control restrictions, as they appeared to be inconsistent with widespread concerns about population-ageing and stagnation.

Most observers (myself included) don’t think that the shift to a three-child policy will have a significant impact on the age of China’s population or the size of its labour force. Survey data suggests that only a relatively small number of people really wish to have a third child. In common with people elsewhere in east Asia, parents (and prospective parents) in China are very concerned about the costs of bringing up children (especially extracurricular education), accessing decent and affordable childcare, the impact on women’s careers, and so on. Without other support in place such as high-quality, affordable childcare, it is hard to see how the policy will directly stimulate a visible change in overall fertility rates.

The announcement is just the latest in a series of adjustments to the family planning policy which have occurred piecemeal over the past three decades. Of course, this begs the question of why China is keeping any restrictions at all. To completely abandon the birth restriction policy would be a remarkable U-turn that would be perceived as an implicit statement about the wisdom and efficacy of China’s original one-child policy. More practically, completely restructuring the family planning programme around the country and redeploying the local family planning officials who remain is a huge administrative task which requires both time and tact.

What is almost comical, however, is the idea voiced by many observers that having more babies will fix China’s demographic challenges in the short term. Lest we forget, babies don’t go to work. In today’s world, newborns are unlikely to enter the labour force until after 2040. Given that the urban pension fund alone is projected by the Chinese Academy of Social Science to become insolvent by the early 2030s, babies hardly seem the most helpful solution. Increasing the retirement age is an easy (if unpopular fix), but one which will only have limited impact – and may even have unintended consequences such as reducing the childcare provided by grandparents which could, ironically, put further downward pressure on fertility rates.

More comprehensive changes will be needed to confront the new demographic reality of low fertility, rapid population-ageing and slow population growth (or even decline). China will need to continue adjusting to the seismic shift away from the decades-long era of renkou hongli, or “demographic dividend”, when cheap labour was abundant and both the younger and older non-working population was small relative to the labour force.

By realising the potential of an increasingly skilled, more mature population, China could reap a rencai hongli, or “talent dividend”, sustaining both productivity growth and healthy, successful ageing. It can also learn from the mistakes of other countries that have already aged, and build ever-more resilient social and economic institutions to support elderly people. Together, such changes can set China on a sustainable path to respond to the challenges of population-ageing and, eventually, decline.

This does not mean, however, that the shift to a three-child policy is unimportant. Reports of working-class couples with excess births being fined or charged “social maintenance” fees they struggled to pay have long been common. In some localities, these social maintenance fees were used to prop up local government budgets which, in turn, led to overzealous implementation – a practice far from unique to China. Numerous families have lost their income as a result of having out-of-quota births. The new three-child policy will inevitably reduce parents’ exposure to the risk of arbitrary or capricious penalties, which will be good for everyone.

Any change in the population policies of the world’s most populous country is bound to be a big deal. But we should never forget that populations are made up of people. Most importantly, for individuals the new policy means more people have more choice than ever before to decide how many children they have. The change will inevitably allow many thousands of families to have three children at their own wish. While these numbers may not make a major impression on a spreadsheet, the impact of the change in policy on such households should not be underestimated.

Read The Full Story