China's population policy

By John Wong, For The Straits Times

China's one-child policy has outlived its usefulness and needs to be changed before it has a further negative impact on economic growth.

  

FIRST introduced in 1979 as one of its ''core state policies'' in the reform period, China''s family planning policy (jihua shengyu zhengce), commonly known as the one-child policy, has since been very controversial. This is because it restricts most, if not all, urban couples to only one child (boy or girl), though many exceptions have been variously applied in rural areas and for ethnic minorities. It is probably the world''s harshest population control programme affecting the largest number of people - about 60 per cent of China''s population.

With the policy having outlived its usefulness, President Xi Jinping now appears set to change it. But China will have to live with some of the unintended consequences for some time.

From the start, the government had to introduce draconian measures to ensure its implementation. The policy caused a lot of suffering (such as forced abortions), along with a number of negative social consequences, including female infanticide and a serious gender imbalance.

The government has justified the huge social cost by claiming that the policy prevented 250 million births between 1980 and 2000 or 400 million births between 1979 and 2011. This has, in turn, alleviated many economic, social and environmental problems that would have accompanied a higher population growth.

Mao and Malthus

ADVOCATING family planning was traditionally seen as opposed to orthodox Marxist ideology.

Back in 1957, when economist Ma Yinchu (then president of Peking University) proposed a mild form of family planning, Mao came down hard on him for being a ''Neo-Malthusian''. To Mao, every additional mouth meant an additional pair of hands. China''s population was then around 650 million, but growing rapidly at over 2 per cent a year. China thus missed its first chance of reining in population growth. 

By the time Deng Xiaoping was about to embark on his economic reform in 1979, China''s total population had swelled to nearly a billion. It was growing at 1.5 per cent a year, with a total fertility rate (TFR, the average number of children per woman) at around 2.6.

State councillor Song Jian, a rocket scientist by profession, then put forth his ''Theory of Population Control'' to Deng. According to Mr Song, China''s population would reach 1.7 billion before the year 2000 by simple extrapolation, and possibly 2.7 billion in the following 50 years.

THAT was a staggering number to Deng and his economic planner Chen Yun. Both still had fresh memories of how Mao had struggled to feed China''s teeming millions when its population was then well below a billion. Deng immediately realised how this potential ''population time bomb'' would jeopardise his economic reform efforts. Clearly, any reform benefits would quickly be eaten up by population growth. China would risk running into what development economists call the ''low-level equilibrium trap''.

Furthermore, population growth is not just about its exponential rate of increase (what the Malthusians call ''geometric progression''). It is also about the least understood problem of ''hidden momentum'': the time needed for a baby girl to grow up to produce another baby girl. In other words, any demographic change requires at least one generation to produce the desired results.

It thus became clear to Deng and Chen that controlling population growth was crucial for the success of his economic reforms. The only way to achieve the desired level of population growth level within the required time frame was therefore to beat the ''time dynamics'' by squeezing the fertility rate well below its natural replacement level. And this would have to start immediately.

Implementation

IN 1980, Chen thus declared: ''Our present priority is to advocate for one child birth per couple''. Such is the origin of the one-child policy, with TFR at 1. The National Population Family Planning Commission (NPFPC) was soon set up, which would subsequently spawn a huge bureaucracy of over 500,000 staff all over China. Suffice it to say that the policy was not a political or ideological product; but rather, a very bold and pragmatic pro-reform and pro-growth social experiment based on ''hard numbers''.

China''s total population by last year had grown to 1.35 billion from 975 million in 1979 - a 38 per cent or so rise in three decades. In the same period, China''s total nominal gross domestic product (GDP) increased from 410 billion yuan to a hefty 52 trillion yuan, or a 126-fold increase. Its per-capita GDP also increased 92 times. Viewed from the angle of reform and economic growth, the policy has indeed achieved spectacular success. In fact, the policy has been too successful by overshooting its original targets. Since the early 1990s, China''s TFR has fallen below the replacement level of 2.1.

Successful economic development everywhere is the best contraceptive, as it is bound to bring about a sharp decline of TFR. The official TFR from the NPFPC (which has become an interest group lobbying for a continuation of this policy) was for years put at 1.8. More realistic independent estimates for current TFR are around 1.5 to 1.6. For Beijing and Shanghai, the TFR has dropped to only 0.7, the lowest in the world.

Social dynamics

DEMOGRAPHY is much more than just counting heads. Mr Song Jian had no doubt got the numbers right. But, along with many Chinese leaders in those days - all of whom have similar science and technology backgrounds - Mr Song was oblivious, if not ignorant, of the many underlying socio- economic forces associated with rapid demographic transition. As population growth declines, its structure also changes. Once its TFR falls below the replacement level, the population starts decreasing in size and then growing older. China''s population is expected to peak in about 10 years at 1.45 billion. Last year, the share of population over 65 reached 9.4 per cent, compared to only 4.5 per cent in 1979. More seriously in 2012, the age-related labour force started to shrink for the first time. This means that China has started to lose its comparative advantage in labour-intensive manufacturing activities.

All in all, the one-child policy has long outlived itself, with socio- economic costs increasingly out-weighing the initial benefits. Though the policy has been relaxed over the years, Mr Xi is set to change the policy further or even abolish it altogether.

With continuing economic development and urbanisation, the decision of a Chinese couple today to have children will increasingly depend on the family income, the cost of bringing up children, opportunity costs in terms of leisure and the wife''s career, and so on. Such is the microeconomic theory of fertility behaviour associated with the Chicago School.

Singapore is the case in point. All the Government''s pro-natal efforts, including handing out generous incentives and benefits to women, have not succeeded in reversing the declining TFR trend.

Accordingly, China''s new population policy, in whatever form, might just come too late. All demographic factors are long-term in nature. At present, China has not yet faced labour shortages. But the overall adverse effect of a declining population growth will slowly set in. The long-term challenge for China is how to get rich before getting old.

The writer is a professorial fellow at the East Asian Institute, National University of Singapore.

 The Straits Times  Published on Nov 13, 2013