China’s One-Child Policy Changes

Published on Author gjeong


A few months ago, the Chinese government announced that it would ease its policy of allowing families to have only one child. The main reason for this policy change is population aging. According to the United Nations, about 8.5% of the current population is over 65, which will rise to 23.9% by 2050. Concerned with its economy and the problem for pensions, the government hopes that the change can boost the slowing growth rate and promote the long-term balanced development of the population in China.

As I argued in my previous post, this change also points out the problem of the decline in workforce. The population of working age shrank by 2.44 million in 2013 and will keep on falling. The country’s urban workforce, producing most of country’s output, is a crucial factor that will determine the long run direction of China’s economy. However, the fact that the population of workforce is declining seems to be a bad sign for the future.

Ding, a China economist at Citi, argues that the decline in the ratio of the working-age population to the dependent part of the population has been contributing to China’s amazing performance. However, he now argues that the working age population has reached its peak and the problem of population aging will reduce China’s growth potential. Although GDP has been rising, the pace of the growth is not much slower and lower that the past.

With the change of the one child policy, economists predict that the total fertility rate will rise and bring about 10 million additional birth in the next few years. Let’s hope that this will work and bring the growth back.

Further reading: NBC News, The Economist

3 Responses to China’s One-Child Policy Changes

  1. State attempts at regulating age demographics are always difficult–both ethically and in terms of achieving the “ideal” age-demographic distribution. Yet age demographics are important factor in economic growth and stability. The data show that when median age is either below the late-twenties OR above the mid-thirties, growth rates of both GDP and GDP/capita are suppressed, thus states should aim for a median age of about 30. Considering that China’s median age surpassed 35 in 2010 (and as you mentioned the % over 65 is predicted to rise to 23.9 by 2050), this change in policy may actually be too restrained.

    Countries with higher incomes per person tend to have older median ages because people tend to reach peak income in the 50s-60s. But these same countries have lower growth potential, because older individuals tend to be much more risk-averse. For instance, societies that skew younger place little value bonds relative to these older countries. The opposite is true for equities.

    Of course these relationships all may disappear with social changes (allowing for greater risk-taking in old age, for example), technological advancements (consider Japan’s remarkable investment in automaton robotics, fueled largely by the need for elder care), and improvements in medical care (which could extend the period of productivity and risk-taking as well).

    For an interesting data-driven analysis of age demographics and economic growth, see Jerry Bowyer over at Forbes.

  2. We’ll look at “demographic dividends” later this term (we already have read about it in Econ 398) – in the medium run the age structure of China’s population is a plus.

    However, even if the current fertility restrictions are binding (that is, removing them leads to a significant increase in births) the macro impact won’t be felt for 25 or even 30 years, when the new, larger birth cohorts have entered the labor market in numbers sufficient to make a difference. So there’s scant help for today’s older workers who will by that point will be passing from the scene.

  3. Williamson, Jeffrey G. (2013), “Demographic Dividends Revisited.” Asian Development Review 30:2, 1-25. [this is from the journal of the Asian Development Bank. Williamson co-authored the seminal paper on this issue in 1998, so this is a 15 year history of this concept]