Photographer: Qilai Shen/Bloomberg

Why China’s Two-Child Policy Shift Comes Too Late: QuickTake Q&A

China had been facing food and housing shortages in 1979 when its leader, Deng Xiaoping, decided to limit most couples to just one child. Over the following three decades, the economy expanded from $61 billion to $2.6 trillion (though some credit this to the loosening of state controls, not the sharp decline in population growth). Now, with China’s population set to peak in a little more than 10 years, the nation is facing a worker shortage. So last year the rules were changed to allow all couples to have two children. Trouble is, not many are taking the government up on the offer. This baby deficit could curtail China’s future growth and its ability to care for its aging population.

1. Why the lukewarm response to the two-child policy?

High living costs, long work hours and surging child-care expenses mean that many couples can only afford to have one child — or none. The number of newborns in 2016 was 17.9 million, the highest since 2010, even as the number of women of childbearing age was shrinking. While the country’s top health authority expects that this number will continue to grow in the next few years, it fell short of what policy makers expected from the reform.

2. Why not remove all limits?

China never does any reform in one stroke — that’s simply not in the marrow of its leaders. Policy makers like slow changes, so they can act based upon the results. For example, in smaller cities, where couples have been more willing to have second children after the policy change, hospitals and pediatricians have been overwhelmed by the baby boom. So before allowing even bigger families, officials might need to build up medical and education facilities and work out new tax breaks for families.

3. What happens without more births?

China’s population will peak at roughly 1.45 billion around 2030. It should then hover at around 1.4 billion until the middle of the century, according to Wang Peian, a senior official from National Health and Family Planning Commission.

4. And this means China’s aging?

Yes. China’s National Bureau of Statistics projects that about a quarter of China’s population will be 60 or older by 2030. That’s up from 13.3 percent of the population in 2010. According to United Nations figures, those 60 and older will be nearly one third of the population by 2050.

5. Why is that a problem?

The ranks of people in their prime working years — age 15 to 59 — will slide to less than 60 percent of the population in 2030 from about 70 percent in 2010. There will also be fewer able-bodied workers and relatives to take care of all those elderly people. This causes a labor squeeze that may already be having an impact: Last year, productivity growth fell to the lowest since 1999, when factory orders evaporated in the aftermath of the Asian financial crisis. Labor shortages and rising wages are prompting manufacturers in the Pearl River Delta, China’s export powerhouse across the border from Hong Kong, to explore automation and robots, a report by Standard Chartered Plc showed.

6. What’s China doing about all its seniors?

China will need more hospitals, more beds in nursing homes and more senior-friendly facilities, particularly in rural areas. The government, which used to limit internal migration, may need to allow medical and pension accounts to be transferred around the nation so retirees can live near relatives or in areas with better medical care. And the government has to brace for growing medical and pension bills. The current pension system, which only dates from the late 1990s, has just 2.9 workers paying into it for every retiree collecting. The system was strained when the government allowed millions of workers who were being laid off from state-owned enterprises to retire early.

7. How else will China change?

It should have a lot more women. The traditional preference among Chinese parents for boys rather than girls, which caused many parents to abort female fetuses, pushed the male-to-female ratio up to 120-100 in some provinces during the one-child years. With the removal of family-size restrictions, China could boost its total fertility, now about 1.4 children per woman, closer to the 2.1 rate needed to prevent long-term population decline.

The Reference Shelf

  • National Geographic explained how the one-child policy changed China in charts
  • Bloomberg View columnist Adam Minter advised China to consider not just lifting all family-size rules, but also allowing more immigration to offset its labor shortages. (In fact, the government is considering just such a move.)
  • Bloomberg news spoke with China’s top demographer, who said the government should allow three or more children.
  • Bloomberg news examined China’s widening pension gap.
  • China’s not alone — this Bloomberg QuickTake explains how Japan is handling its aging population.

— With assistance by Yinan Zhao, and Grant Clark

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