Tanvi Misra is a staff writer for CityLab covering immigrant communities, housing, economic inequality, and culture. She also authors Navigator, a weekly newsletter for urban explorers (subscribe here). Her work also appears in The Atlantic, NPR, and BBC.
It may be too late to avert the slowdown it contributed to in the first place.
Today the Chinese government dropped its longstanding one child policy, according to a state-run news organization. Turns out this controversial policy, instituted in 1980 to curtail the country’s massive population growth, was too effective. It restructured demographics drastically, and put China on a path to economic slowdown that was masked by its boom. Today’s announcement is unlikely to divert the country from that undesired path.
Economists saw it coming. In 2012, Brookings Institution’s Wang Feng, an expert in Chinese demographics, warned of what the policy would mean for the country with the largest labor force in the world. He opens his report dramatically:
China’s demographic bullet train is racing into the unknown. Its carriages are already full, but more passengers squeeze in every minute. Most are not young, productive workers, but older travelers who cannot pay for their ride. No one knows where the train will stop, nor whether it will arrive safely.
Wang explains that the country’s 2010 Census revealed that its population growth had slowed down to half of what it was in the 1990s, and a fifth of what it was in the 1970s, when the one-child policy was introduced. Fertility rates dropped far below countries like the U.S. and India to a level similar to countries like Germany and Japan, which have shrinking populations.
As a result, the country’s aging population started bloating, and its share of young people started shrinking. Since 2012, the working-age population of 15- to 59-year-olds has been declining, Bloomberg News reports. The U.N. predicts that these trends will accelerate:
By 2050, the country’s age pyramid will invert from what it was in 1950:
In his 2012 report, Wang makes this grim conclusion:
The demographic dividend China enjoyed over the past 30 years—especially in 1980-2000—is now largely exhausted.
A 2014 International Monetary Fund working paper builds on Wang’s work. It predicts that between 2020 and 2025, China will reach a turning point (called the Lewis Turning Point, after the economist who came up with the concept) where cheap, agricultural labor required to keep its developing economy going will be exhausted. Here are authors Mitali Das and Papa N’Diaye, via the report:
The core of the working age population, those aged 20–39 years, has already begun to shrink. With this, the vast supply of low-cost workers—a core engine of China’s growth model—will dissipate, with potentially far-reaching implications domestically and externally.
Today’s announcement is unlikely to change the course of this economic future. For one thing, Chinese cities (many of which saw drops in fertility between 2000 and 2005) are expensive places to bring up children in, and not many urban couples were up for the task following previous relaxations in the policy, Bloomberg’s Adam Minter points out. For another, today’s policy change allows couples to have two babies instead of just one, so officials are still technically regulating births (to the frustration of human-rights activists). And even if officials allowed multiple babies and people started having them, it’s unlikely they’d grow up in time to significantly delay the IMF’s prediction.
Given these factors, the turning point seems inevitable. Here’s how the The Economist explains what the future will bring:
When that happens the world may look different. Consumer goods will cost more, though some low-skill jobs may come back to the west. China can't sustain its current rate of growth; the question is whether growth will slow before incomes have attained rich-world levels or while many have yet to benefit from the fruits of development. The Chinese model seems to rely on continuous improvement in living standards; the fear is if that stops there could be social unrest. Chinese growth has often confounded observers. If China becomes a leader in innovation growth might continue. It will take such a leap to overcome demographic headwinds.
But while today’s long-overdue announcement may be too late to delay the slowdown in growth, it is still important, Wang tells Reuters:
"It's an event that we have been waiting for a generation, but it is one we have had to wait much too long for," Wang said. "It won't have any impact on the issue of the aging society, but it will change the character of many young families."