Will China’s economic strategy address demographic challenges?

The third plenum of the 18th Central Committee of the Chinese Communist Party in November 2013 marked a turning point in China’s population policy. The policy blueprint ended the country’s one-child policy, allowing couples to have a second child if either parent was an only child. This marked a watershed moment in China’s population policy as draconian birth controls had finally come to an end.

China’s family planning law stipulates that couples can have three kids, but in reality, Chinese couples are encouraged to disregard the birth limit and can have as many children as they want. An administrative system designed to punish “unplanned” births has been totally abolished.

The government will no longer levy hefty fines on those who refuse to control the number of kids. Sterilisation is not banned but requires medical proof that it is a necessary procedure. However, the measures failed to lift China’s birth rate, dropping from 16.87 million births in 2014 to 9.02 million in 2023.

There is growing recognition in China that it is facing a “grey rhino” problem when it comes to population, with a shrinking labor force, plummeting births, and rapidly ageing population.

The lessons from China’s family planning policies are clear: the real problem was not runaway population growth but an uncontrollable decline. After nearly four decades of mobilizing the state’s resources to curb births, the government is now facing a new daunting task of encouraging births. Local governments have started taking initiatives to encourage births, such as lower down payments for home purchases by families with more than one child.

Some Chinese companies have volunteered to shoulder “social responsibility” by encouraging births among their employees. The third plenum of the 20th Central Committee offers a chance to address the problem using a “top down” approach.

China must phase out all regulations, institutions, and advisers closely associated with birth controls, and make significant changes to the country’s state pension and healthcare systems to serve a rapidly ageing society.

The long-term solution for China’s demographic problem is to achieve a fertility rate of 2.1 to maintain a steady population, which means making systemic changes to policy and social settings to create a “birth friendly” society.