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What Happened to China’s Baby Bump?

What Happened to China's Baby Bump?
Births are again trending down, despite the two-child policy.


By Dexter Roberts | February 13, 2018
From Bloomberg Businessweek


When James Chen and Subrina Huang first heard in 2015 that top Communist Party of China officials had decided to end the decades-old one-child policy and allow all parents to have a second child, they excitedly considered trying for No. 2. "We thought we might like to have another," says Chen, 35, sitting in a coffee shop in Shanghai. "I wanted a boy."

No more. The couple already spends 20,000 yuan ($3,172) a year on extracurricular classes, including English and dance, for their 6-year-old daughter, and costs soar for children as they progress through school. Then there's the housing issue. "With two children, we would have to consider buying a new place," says Huang, 33, who earns 5,000 yuan a month working at a flooring company. That's a daunting prospect in a city where property costs are 91 times the average after-tax salary, according to Numbeo, a website that compiles cost of living data. (In New York, the multiple is 25.) 


"Having one baby is already not easy at all," says Chen, who earns 6,000 yuan a month working as an internal auditing investigator for Dell Inc. "Now, I can't imagine having a second one."

Chen and Huang have plenty of company. Speaking in Beijing on Feb. 5, Yang Wenzhuang, an official at the National Health and Family Planning Commission, said about four-fifths of Chinese couples say financial pressures are stopping them from having a second child. While the number of newborns surged 7.9 percent, to 17.9 million, in 2016, the first year the policy was loosened, it resumed the downward trend last year, falling by 630,000, or 3.5 percent, according to China's National Bureau of Statistics. "Of course, when you change the policy, you are likely to have a spike, but that doesn't mean it's sustainable," says Anke Schrader, a senior researcher at the Beijing-based Conference Board China Center for Economics and Business, who co-authored a Jan. 26 report called "Two-Child Policy Won't Produce a Baby Boom." Says Schrader: "The financial burden of bringing up children in China is too much."


That's particularly true in China's cities, where 14.3 percent of total household expenditure goes to children's education, according to a study published by Peking University last year. Factor in soaring apartment prices, and it's not altogether surprising that fertility rates in such places as Beijing and Shanghai have dipped below one, probably the lowest in the world, says James Liang, author of The Demographics of Innovation (Wiley, February 2018), a book that looks at the economic implications of China's aging population. Although fertility is higher in rural areas, women of childbearing age nationwide had an average of just 1.6 offspring last year, which is slightly below Russia and on a par with Canada. (Liang expects the rate in China to start falling again after the initial enthusiasm for the loosened policy dissipates.) 


"China faces a baby crisis," says Wei Siang Yu, a Singaporean doctor and entrepreneur who created Fertility UFO, a video series that launched on Jan. 30, in which doctors dispense tips to real-life couples trying to conceive. The latest government projections have the nation's population peaking at 1.45 billion around 2030, then falling to just 1 billion by the turn of the century.


The government's failure to ignite a baby boom is cause for concern in policy circles. On Feb. 7,  the state-owned China Daily published an article that said, "There is growing concern that the country may experience a demographic time bomb, because in the decades to come the number of young people is likely to fall below the number required to maintain an optimum level of employment." China's working-age population, those 16 to 59, is 902 million, according to the national statistics bureau. But it's been shrinking since 2012 and fell by 5 million last year. In the decade starting in 2025, China will log 7 million retirees a year. "This will add pressure on China's lowly and acutely underfunded social welfare programs," says the Conference Board report. "Workers will bear significant burdens to support their aging parents and grandparents." 

Innovation and entrepreneurialism are likely to also take a hit as China's workforce becomes older, says Liang, who's chairman of Ctrip, a website that processes travel and hotel reservations, citing Japan as a cautionary example. Not only will there be fewer young people, who tend to have a higher appetite for risk than their elders, but they'll be a minority in the work world. "In an aging country, [younger employees] usually have a lower position in a company hierarchy," Liang says. "They have less management skills, less financial resources, and less social connections as well. So they are less capable as entrepreneurs." 


Policymakers have considered proposals to reduce taxes on larger families and lower the minimum legal marriage age to 18 (it's 20 for women and 22 for men), but have failed to take action. This year could be different. Delegates to China's annual National People's Congress, set to open in early March, are likely to consider tax rebates or even direct subsidies for families that have a second child—and following last year's disappointing birth numbers, they may finally pass. In addition, China's health authorities already announced an ambitious plan to add 89,000 maternity beds in hospitals and 140,000 obstetricians and midwives by 2020. Meanwhile, Beijing Mayor Chen Jining unveiled plans in late January to add 30,000 preschool spots and build more kindergartens.


All this is unlikely to reverse the declining birth trend. As the Conference Board's Schrader points out, China already has relatively generous policies to support families, including an average of 161 days of paid maternity leave. Since the two-child policy was introduced, several provinces have also lengthened paternity leave. Tibet, for example, now offers one-month paid leave to new fathers.


China may be too far along on its development track for these policies to make a difference. As people grow wealthier and more educated, birthrates typically fall around the world, says economist Gan Li of the Southwestern University of Finance and Economics in Chengdu. That's because couples tend to focus more on their careers and are less interested in having the larger families that traditional societies have favored. "China is already a high-income country in its big cities," Gan says. "The trend of a lower and lower fertility rate will happen, regardless of policies." 

BOTTOM LINE - Chinese policymakers are likely to consider introducing tax rebates or direct subsidies for households that have more than one offspring.