A New Direction in Population Policy in China
November 01, 2021
About the author:
Wang Hui, Fellow of Taihe Institute, Affiliated Scholar of University of Cambridge.
KANG: China has relaxed its two-child norm and endorsed a three-child policy. What is China’s demographic background for the policy shift?
Wang: Based on the Seventh National Population Census report issued in May 2021, China’s demographic outlook is rather an uncertain one as society faces increasing pressure caused by a shrinking and ageing population. China’s population is also suffering from a biased gender ratio of male to female (113:100) where the male population is disproportionately more than the female one. The number of young people entering the labour force (age 20-24) has already peaked in 2010 and the total population will likely peak within five years as births drop. It is highly possible that this year China will see its population decline for the first time since the founding of the PRC, in terms of deaths exceeding births.
Currently, people above age sixty account for 18.7% of the population, indicating that China is rapidly entering a super-aged society where the elders (age 60 and above) make up over 20% of the Chinese population.
Improved public health has led to longer life expectancy and lower mortality rates. This, along with a falling fertility rate, are explanatory factors for China’s ageing society. And among all these factors, the falling fertility rate is essentially the most instrumental one affecting China’s future population growth.
Demographic reasons for China’s decreasing fertility rate include a fast-shrinking population of women of childbearing age (between 15-49) declining at roughly five million each year, later marriages, older first-time mothers, and fewer married couples. The socio-economic implications include a shrinking labour force for future economic growth, dramatically reduced consumption, and a larger number of elderlies with increased financial and healthcare needs. Since 2010, China’s economic growth has continued to slow, regressing to the mean, as the advantages of China’s demographic dividend have begun to disappear. China is also in danger of “getting old before getting rich,” namely that it enters an ageing society before becoming a high-income country.
The projection of China’s demographic development in the future is dire. As predicted by the United Nations, China’s population will stop growing in 2030 and halve by 2050. India will likely take over China as the most populous country in five years. However, the entire global demographic landscape is also bleak. Most countries are confronted with similar demographic challenges as their societies age and the number of working-age adults shrinks. Population growth in the United States and Europe has already stopped and many Asian countries are on the same trajectory. Currently, Africa is the only major region worldwide with a high fertility rate of more than five children per woman. By 2050, the African population will double to two billion, constituting about one-quarter of the world population. Although an exponential growth in population is guaranteed in this century, Africa faces the so-called youth bulge problem that often causes stability issues. Demography will certainly play a key role in geopolitics in shaping new political and economic realities. Yet, on the positive side, demography is more predictable than economic and political issues. Therefore, early intervention with properly crafted policies could help prevent the worst scenarios from happening.
KANG: What are the reasons for this policy shift?
WANG: The major policy shift already happened in 2015 when the two-child policy was fully open to encompass all families, signaling the ending of the over 30-year-old population policy. The change from the two-child policy to the three-child policy further confirms that the one-child population policy has been effectively abolished and was replaced by policies centering on families in order to increase the total fertility rate and tackle China’s rapidly ageing population and shrinking labour force. In essence, the policy shifted from a controlled to an open natalist model.
The three-child policy has been introduced as the momentum for couples to have the second child has begun to falter and the number of first babies dropping. China’s most updated total fertility rate is 1.3 per woman in 2020, which is well below the ideal replacement level of 2.1 needed to keep the population from shrinking.
In practice, the two-child policy is merely a relaxation of the one-child policy without sufficient supporting policies to change the attitude of families, especially that of the newly married couples, towards their decision concerning childbearing. The name of the new policy, the “three-child policy” follows the existing nomenclature of the policy, that is from “one-child” to “two-child” to the current “three-child.” The change of the name should not be over-emphasised as it is merely an alteration of a label. The core of the new policy lies in the forthcoming supporting policies centred around families.
China is not the first country that has changed its population policy. Singapore’s shift from the population policy to the family policy happened in 1987 when the “Stop-at-Two” policy was replaced by the “Have-Three-or-More.” However, the “Have-Three-or-More” was not successful as the fertility rate further declined and reached its historical low at 1.1 children per woman in 2020. This number is one of the extremely low fertility rates observed by the UN. In this regard, challenges for China’s three-child policy are lying ahead.
KANG: How well did the two-child policy work?
WANG: The impact of the two-child policy was rather limited in its scale. It was temporary but it revealed the root cause of the declining population growth. It was observed that after the introduction of the two-child policy, there was an immediate surge in the growth of the second child, but the growth gradually slowed down. The staggering fact is that the two-child policy had little effect on the number of first births. On the contrary, it decreased at a yearly rate between 10-20% after the new policy was introduced in 2015. Therefore, the total fertility rate decreased from 1.7 in 2015 to 1.3 in 2020. This clearly suggests that the two-child policy did not prevent the total fertility rate from falling.
In real terms, the introduction of the two-child policy did not come with a set of relevant policies, namely family policies specifically tailored to support various types of families to grow. One reason could be that the authorities were not fully prepared for such a policy shift, as China’s growth has been facilitated by the demographic dividend for three decades. The concept of a comprehensive set of family policies that should be put in place to increase the fertility rate has been relatively new to the government. Therefore, not much has been changed in practice. Changes brought about were merely due to a relaxation of the single-child policy. This was partly the reason why the two-child policy was not proven to be effective.
Other main reasons that kept the fertility rate low include the changing composition of the population. Again, the cohort of women in the childbearing age is shrinking dramatically at around five million each year. The number of registered marriages, which is in positive correlation with the population of the first childbirths, is also on a declining trajectory. Moreover, the average age of marriages and that of the first mothers are becoming older as well. This demographic situation was overlooked when the two-child policy was introduced.
KANG: What are the key objectives of the three-child policy?
WANG: The goal of the three-child policy cannot be understood literally as to expect families to have three or more children. The number of women who have the potential to have a third child is only 20% to 30% of those who would have one child. Therefore, the expected increase in childbirth from this population cohort is marginal.
Ultimately, the three-child policy aims for increasing the fertility rate, securing the future labour force, and alleviating the burden of an ageing population on society. The key objectives of the three-child policy lie in the layout of the supporting policies that attempt to encourage families to have more children by reducing the costs of childbearing through providing specific social and economic support for eligible families. In particular, the complementary policies, which focus on several aspects such as housing subsidy, tax benefits, early childhood education and care provision, maternity leave, and parental leave aim at alleviating the financial burden on families with children. These are not unique to China but are common areas of family policies that have been constantly implemented by governments of OECD countries as well. The broad objectives of the family policies include balancing work and family responsibilities, encouraging female labour participation, guaranteeing the financial sustainability of the social security system, promoting the healthy development of children, as well as gender equality.
KANG: As observed in social media, many people have been skeptical about this policy shift, worrying that the new policy would still not be sufficient in addressing existing problems brought about by demographic change and lift the burden from families. How should we understand the potential social impact?
WANG: China is not alone facing the demographic challenge. On the contrary, this is a global concern, especially in the large economies in Europe and Asia. Countries have to experience the so-called demographic-economic paradox when they reach a certain national income level. That is to say, at one point of development, rising income will have to be associated with falling fertility. Many countries have introduced and experimented with various family policies to address this issue. But most of the time, the policies have been unsuccessful in preventing the fertility rate from continuously dropping. This situation is certainly burdensome for many governments and policymakers across the continents.
Family policy is a long-term policy. Its impact on fertility rate is often complex and cannot be felt in a short period of time. Therefore, it is difficult for governments to assess the effectiveness of various policy instruments. The relationship between, for example, the family policies on maternity leave, paternity leave, the length of the parental leave, the amount of the child allowance, the provision and quality of the early childhood education and care facilities, and fertility rate are closely intertwined. They have mixed impacts on a family’s decision about the size of the family, the child-bearing practice, as well as the female’s participation in the labour market.
At the individual level, people are more concerned with factors affecting their daily lives. Stability of career and their financial situation, cost of living, work-family balance are just a few examples of what will be considered before making a decision about growing a family. In addition, decisions on when and how many children to have vary greatly across households and countries due to different family situations, social norms, and economic and political settings. It is rather an issue discussed in private space. Obviously, governments have no direct control over people’s willingness to reproduce. In China, the ideal number of children is 1.8 per woman, but the actual fertility rate is 1.3 per woman. The challenge is how can the state help achieve this ideal size of family through the new family policies being put in place.
In summary, both the state and the individuals are uncertain about how the three-child policy will influence the future development of China's demographic transition. Whether people will become more confident about the new policy depends on how the family policies are designed and implemented. On a positive note, unlike the population policy which aims at controlling, restricting, and exercising authority, family policies tend to encourage, stimulate, and motivate family planning. Therefore, the shift from population policy to family-oriented policies intends to not force but connect with and support people.
KANG: What are some safeguard measures to ensure implementation? How to balance the concern of individuals and the interests of the state?
WANG: To understand the implementation of the newly designed family policies and the balance between the state and the individual, one should first look at the type of policies being employed for it helps to reflect on the traditional and cultural norms of the country. The social and cultural factors also have a general impact on people’s response to the policy agenda itself since the childcare system constructed under the family policies connects the state with the individuals and binds men and women together in sharing responsibilities.
One example is Germany. Prior to reunification, West Germany employed the “male breadwinner model” in its family policies. The rationale of this model comes close to the Chinese traditional value, which determines that childcare is a private matter whose responsibilities should be borne by the individual households. The role of the state, on the other hand, is insignificant. Within this model, the former West German government carried out a set of policies intending to grant women a long period of time to take care of their children under three years old. However, they did not provide sufficient institutional care. Mothers were supposed to stay at home and look after their children until the age of three. Not surprisingly, the model had a negative impact on female labour participation, and it failed to reverse West Germany’s falling fertility rate. However, after reunification, this familist model was gradually changed and was combined with the “dual-earner model” once adopted in former East Germany.[1] In 2002, a “sustainable family policy” that views children as future assets emerged to mitigate work-family conflicts and reduce children’s poverty by supporting female labour participation. The “sustainable family policy” has been proven more effective for Germany: by 2016, Germany’s total fertility rate climbed up to its peak at 1.59 children per woman.
One lesson that could be drawn from this example is that countries should carefully compare different models at the policy-design phase and choose the ones most appropriate for their own national situation so as to efficiently promote state-individual responsibility sharing in childcare and help people balance their work-family lives. Family-friendly policies that have been used extensively and proven more effective than other existing ones include, for example, affordable, high-quality early childhood education and care, paid parental leave, child allowance, and support for breastfeeding.
The Chinese government has already started to roll out some policy initiatives to help curb the cost of living for children’s upbringing. These include providing housing subsidies for families with children and reducing the cost of education. The government also recognizes the importance of providing support for the “dual-earner” family through expanding the early childhood care for those under three years old, as well as safeguarding the legal rights of women in employment. Work-family balance is reinforced by the introduction of a more flexible parental leave, as well as paternity leave to encourage the participation of fathers in childcare, which will soon be piloted in Beijing. Child allowance is also being introduced in Sichuan and Gansu provinces.
Besides the existing policy instruments, understanding the complex relationship between fertility rates and various family policies is vital for the government to make decisions on policy combinations. For instance, child allowance and parental allowance generally have a positive impact on fertility: the more childcare facilities for under three-year-old children are provided, the higher the fertility rate. With policies balancing the work-family life in place, a higher female labour participation rate would supposedly be coupled with a higher fertility rate. Furthermore, experiences from the EU and OECD countries confirm that the most effective policy instrument is the expansion of early childhood education and care provision, especially for children under three years old. China’s current coverage of institutional childcare facilities for children under three years old children is only 0.4%. In Germany, it is over 30% and in Denmark over 70%. This shows that China has ample room to grow in this area.
Equally important is to ensure sufficient government spending for families at various levels. In Germany, 2.82% of the GDP is spent on families in areas such as children allowance (Kindergeld), paid parental allowance (Elterngeld), public services and financial support for families provided through the tax system. This is the highest amount of governmental spending on families compared with all the other member states in the EU.
As China embarks on the journey of social policy reform for families, relevant research and data collection and update are indispensable to help policymakers understand the changing paradigms of the demography and assess the effectiveness of new policies.
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[1] Until 2016, the eastern part of Germany still had a much higher coverage in institutional childcare for children under three, which was 52% compared with only 27% coverage in the western region.
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