China seeks formulas to defuse a demographic bomb that the authorities themselves programmed and loaded with extra dynamite, promoting restrictive policies on the birth rate and programs to delay births. Now China has announced that it will allow all couples to have a third child, a move aimed at curbing the country’s plummeting birth rate, which has become the economy’s biggest long-term threat.

Many countries are facing a reversal of the demographic pyramid , but the vast majority are doing so when they are already developed economies. China faces the same problem, but is still a middle-income economy. Now, the Government seeks to undo the mess to try to improve long-term growth prospects, highly threatened by the decline in the working-age population, which began to be a reality in 2011.

Programming the ‘pump’
China’s total fertility rate has plummeted from 6 children per woman in 1950-1955, to 2 in 1990-1995 and slightly above 1.5 from 2015 onwards.

The decrease was especially rapid between 1970 and 1980 , when China launched the campaign later, longer, fewer (later, more time, less, which came to ask the population for a later marriage and an older age to receive the first child, longer birth spans and fewer children overall), which was followed by the formal introduction of the ‘one child’ policy in 1979 . In fact, a large part of the decline in the birth rate took place in 1975-1980. As a result, China’s population growth rate dropped dramatically.

These policies sought a faster development of the country in terms of GDP per capita, that is, of the wealth that touches each inhabitant. If population growth continued to exceed productivity growth, even if the economy in aggregate terms (total GDP) continued to advance rapidly, growth would be much lower by dividing all production among inhabitants (per capita GDP growth) .

So the Chinese authorities decided to implement these birth controls along with a battery of economic reforms that together have been the basis of Chinese success in recent decades. However, birth control policies may have gone too far, at least if what is sought is to prioritize the economic interests of the country. China could go from being a labor-intensive country to having trouble finding workers.

A prematurely aging country
To all of the above, we must add the costs of having an aging country. A lower birth rate will lead to a larger retiree population. Beijing will need to rapidly increase spending on pensions and health care.

“A comprehensive policy package ranging from tax incentives, education and housing subsidies, more generous maternity leave, universal provision of childcare is needed” for the three-child policy to be effective, Liu Li said. Gang, Managing Director and Chief China Economist at Citigroup. The government will need to rebuild the social safety net, as well as contain house prices and reduce the costs of education.

For a few years now, China has been gradually reforming its strict birth policy. The authorities expanded the number of children each couple could have to two. However, that reform has done little to reverse the decline in the birth rate.

Furthermore, it seems unlikely that further relaxation of the limits will lead to a prolonged increase in the birth rate. Now that the country’s citizens have a higher income and show other preferences, increasing the birth rate is going to be an arduous task, as is the case in many of the developed countries.

In a meeting chaired by President Xi Jinping on Monday, the Communist Party Politburo has decided to ease the current limit of two children, to announce that it “will allow each couple to have three children and will implement supportive policies related to improving the structure of the population, “according to a report by the official Xinhua news agency .

It is not yet clear when the measure would take effect, although the main policy measures to be implemented in the period until 2025 were discussed at the meeting.

Some officials, including researchers from the People’s Bank of China, have called for birth limits to be removed entirely. The debate intensified after the results of China’s latest national census earlier this month showed a decline in the country’s working-age population over the past decade.

Delay retirement
The Communist Party of China also announced that the government “will prudently raise the retirement age progressively,” according to the Xinhua report. China has one of the lowest official retirement ages in the world, and the Communist Party already announced plans to reform the system last year. Right now, the legal retirement age for men is 60 and 55 for women.

The fewest births since 1961
The declining birth rate means that China’s population, currently at 1.41 billion, could start shrinking before 2025, according to estimates from Bloomberg Economics . Last year 12 million babies were born amid the uncertainties of the coronavirus pandemic, the lowest number since 1961.

“We believe that a slowdown is inevitable. Demographics show that China’s working-age population is shrinking. In the absence of drastic improvements in labor productivity, a smaller workforce means a lower GDP growth rate.” claimed J. Stewart Black and Allen J. Morrison in an analysis published in the Harvard Business Review

“Japan has experienced a similar decline in the working-age population and has been unable to achieve the productivity gains necessary to sustain growth. China’s companies are unlikely to succeed where Japan’s have failed, mainly due to Factors that have driven China’s spectacular growth in the last 20 years have been greatly weakened: they started from very low productivity, there was an excess supply of rural workers and China has had easy access to technology, “these experts explain.

Without China, it cannot significantly boost the birth rate with its new policies, there are only two relevant ways for a country to compensate for the reduction in the workforce: increasing the number of workers through immigration and increasing worker productivity. current.

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