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China Considers Policy Shift To Put Population Growth Before Economy

Bloomberg News

Facing a demographic time bomb that threatens China’s economic rise, President Xi Jinping is considering shifting his priority to population growth, according to a person familiar with the discussions.

Xi’s economic planners may for the first time emphasize “population policies” over gross domestic product in the country’s next development blueprint, said the person, who asked not to be identified because the talks are private. The focus sets the stage for a host of rule changes regarding health, pensions, social welfare and possibly lifting the caps on children some families can have, the person said.

More than three decades into an industrial boom that has created the world’s second-largest economy, China’s struggling to get rich before it grows old. The working-age population shrank for the first time in at least two decades last year as growth slowed, echoing Japan’s downturn in the late 1990s. As part of the shift, the party may lower its hard growth target of 7 percent to a range between 6.5 percent and 7 percent and make that a flexible guideline, the person said. 

Mu Guangzong, a professor at Peking University’s Institute of Population Research, said that avoiding the same fate requires immediate action to loosen birth limits and strengthen the social safety net for the elderly.

“Reform is lagging too far behind and has been too cautious,” Mu said. “We must move from restricting childbirth to encouraging it as soon as possible. We must complete a thorough change of population policy.”

One-Child Policy

The “one-child” policy, which limits most couples to one or two children depending on ethnic background and where they live, was a cornerstone of late leader Deng Xiaoping’s efforts to overhaul the economy. When the policy was adopted 36 years ago, the thinking was that the birth rate of almost 3 children per woman was a drag on growth.

The cap has since been relaxed and calls to lift it completely havegained traction as the fertility rate plunged and eroded the labor pool. In December 2013, the legislature allowed couples to have two children if either parent was an only child.

The challenge China faces is motivating parents like Feng Yanbin, 37, of Beijing, to give her daughter a brother or sister. The cost of raising a second child has deterred Feng and her husband, even though they’re eligible.

“To have a child in China is a test of a family’s economic strength,” Feng said. “The policy has been changed, but the younger generation in the cities still need to consider their economic situation before having a baby.”

Five-Year Plan

About 1.5 million couples had applied for a second child under the new policy as of May, according to the National Health and Family Planning Commission. That lagged official projections of an additional 2 million new births annually.

The results have fueled calls for a more dramatic approach as Xi finishes the country’s next five-year plan, a Stalinist holdover of China’s old command economy. The plan was expected to be discussed with Communist Party elders earlier this month before approval at party meetings in October.

“The dependency ratio is increasing, the pace of aging is quickening and the working-age population is shrinking,” said Ren Yuan, a deputy director of the Institute of Population Research at Fudan University in Shanghai. “The 13th five-year plan needs to be tailored to manage the sustainable and balanced growth.”

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