Short of Workers and Consumers, China Abandons One-Child Policy

Updated on
Will Ending the One-Child Policy Benefit China's Economy?
  • Policy change part of Xi Jinping's new five-year plan
  • Shares of baby-formula maker Danone jump on news of change

China ended one of the most ambitious demographic experiments in human history, abandoning the limit of one child for most families to foster the population growth required by the world’s second-biggest economy.

Introduced by Deng Xiaoping in 1979 to husband a then-impoverished nation’s scarce resources, the baby limit now threatens to undermine growth: the working-age population shrank last year for the first time in two decades and the cohort of senior citizens is projected to grow rapidly.

The Communist Party’s Central Committee’s decision to allow all couples to have two children was disclosed by the Xinhua news agency, citing a communique released at the end of a four-day party policy meeting in Beijing. A previous effort to relax the policy fell well short of the goal of boosting births by 2 million a year.

"It shows the party wants to take action as soon as possible, and shows there is no time to delay for China to modify its population policy," said Wang Yukai, a professor at the Beijing-based Chinese Academy of Governance. "They couldn’t wait for the legislation to pass next year. The leaders want the new policy now."

The changes are part of President Xi Jinping’s blueprint to manage the economy’s shift to slower, more balanced growth. The new five-year plan represents Xi’s best chance to implement social and economic reforms outlined since he took power in 2012 and avoid falling into the "middle-income trap" of stagnation.

Economic Transition

China is trying to complete its transition from a investment-and-export-dependent developing nation to a "moderately prosperous society" with an economy powered by services, consumers and innovation. Xi has said the China needs to accept a “new normal” of slower expansion after three decades when growth averaged about 10 percent.

The five-year plan "is the decisive phase for achieving a moderately well-off society," the Central Committee said. Demonstrating Xi’s interest in the plan, the president personally presented its details to the committee. Xi has defined the phrase to mean a doubling of GDP and per capita income over the decade through 2020.

One-Child Policy

Shares of France’s Danone SA, one of the world’s biggest producers of baby formula, rose as much as 3 percent to the highest since April after the changes in family-planning policies were announced. Procter & Gamble Co., maker of Pampers, added as much as 0.4 percent.

The “one-child” policy, which limited couples to one or two children depending on ethnic background and where they live, was a cornerstone of late leader Deng’s effort to build an economy ruined by decades of war and the ideology-fueled reign of Communist Party founder Mao Zedong. When the policy was adopted, the thinking was that the birth rate of almost 3 children per woman was a drag on growth.

Since then, China’s population has grown to about 1.36 billion, almost 20 percent of the world’s total, up from about 930 million in 1976. India, with about 1.3 billion people, is projected to pass China within the next decade, according to World Bank forecasts.

After decades of discouraging people from having children, the challenge is changing the mindset of potential parents worried about the costs of expanding their families. Only 1.1 million of the 11 million couples eligible to have second child under a previous policy relaxation in December 2013 applied for permission, according to Xinhua.

Economic Blueprints

Allowing all couples to have two children could add 3 million to 8 million births annually, according to Huang Wenzheng, a demographer at Johns Hopkins University in Baltimore. The communique said the government would continue to manage family planning decisions, despite the relaxation.

The Central Committee’s communique marks the first step in the official roll-out of the 2016-20 blueprint. More details are expected in coming days with the release of the draft plan, which won’t be completed until the national legislature approves it next year.

The plan -- a Soviet-style holdover of the centrally planned economy -- guides China’s policies on everything from health care and family-planning to steel production and technology research. It also gives the leadership an opportunity to reassert its commitment to market-based reform after rescuing indebted local governments and a plunging stock market earlier in the year.

Among other things, the party is seeking to eradicate poverty as defined under current standards, lifting the country’s remaining 70 million poor people above the poverty line by the end of the decade, according to the communique. It wants to boost social programs, reduce price controls and institutionalize Xi’s anti-corruption campaign.

The plan would call for making China an Internet powerhouse and carrying out what it described as a nationwide "big-data strategy." It emphasizes green growth and promoting Xi’s "One Belt , One Road" infrastructure and trade initiative.

— With assistance by Ting Shi, and Keith Zhai

Before it's here, it's on the Bloomberg Terminal. LEARN MORE