Two-child policy might be too late for China

Two-child policy might be too late for China

China needs more babies to counter its ageing population and shrinking workforce. But relaxing the country's one-child rule might not be enough to convince increasingly prosperous Chinese women to have more children. Even if effective, the shift would only have a marginal impact on the economy.

For over three decades, China's one-child policy has been harshly but unevenly enforced. Rural families, ethnic minorities and couples who are both only children are already exempted. Now the authorities are considering allowing families where just one parent is an only child to have two children, according to Chinese media reports. A blanket two-child policy is also under discussion. Though a change is far from assured, the discussion reflects China's ageing demographics. Today, people aged 60 and above make up just 15.5 per cent of total population, while those aged 15 to 59 account for 68.1 per cent, according to one United Nations estimate.

However, the share of elderly is expected to jump to 39.3 per cent of the population by 2050, while the working age population will contract to 52.5 per cent. Phasing out the one-child policy might not be enough to persuade women to have more children, however. Economic growth is often associated with lower fertility as more educated women join the workforce.

China's fertility rate -the average number of children born to each woman -is currently estimated at around 1.4. Shanghai and Beijing have fertility rates of less than one, as an increasing number of women choose not to have children at all.

Another factor is the soaring cost of living, particularly in cities. Even if a two-child policy spurred women to have more children, the economic impact would be marginal.

Today, China has 79 million urban women aged 20 to 39. Assume that two-thirds of those are restricted by the current policy, and that half of those that were allowed to have a second child under a revised rule did so over the next decade. That would mean 2.6 million extra babies a year, compared to the 16 million or so already likely to be born each year. Such a baby boom might lift consumer spending on nappies, strollers and baby food. But it would come too late to seriously shift China's ageing demographics.