China’s One-Child Policy

Q: So right now the fertility rate is about 1.5?

A: Right.

Q: And 10 years from now, which will be a decade after the one-child policy is lifted, do you think it will only rise to 1.6?

A: That is possible; but I would not be surprised if the fertility rate were to drop even lower, to 1.3 for instance, to what we see in Japan and South Korea. This is because the larger context of the financial pressure on a parent is unlikely to change in the short term and could actually become more stressful.

Q: What conclusions can we draw by looking at other countries in the region that have gone through China's development cycle? Is China's fertility rate following a similar trajectory and, based on this comparison, is it likely to go lower?

A: Absolutely. If you look at the whole world, the region that has the lowest fertility levels is East Asia. Regardless of political system or policy, they all share the same feature of very low fertility. Even when governments in this region have adopted pro-birth policies, those have had little effect.

Q: Do you think that ending the one-child policy will have an impact on the imbalance in China's male-to-female ratio?

A: I think it will. There are two things that are happening right now that are resulting in the abnormal sex ratio. One is the effect of policy, because policy suppresses people's behavior or choices. The other is something that is actually not talked about much: it's not because of the policy; it is because when fertility is going down to a very low level, and when people still have a preference for boys, the sex ratio becomes abnormal. This was what happened in South Korea in the mid-1990s. Eventually, the preference for boys will decline and, as the policy is changed, both factors will lead to an improvement in the sex ratio.

Q: How large is the sex ratio imbalance today?

A: We estimate there are between 20 to 40 million excess males in China. Such a number, though spread over time, could have a number of social consequences. Primarily, poor rural men will struggle to find a spouse in the coming years. Further down the road, these will be lonely elderly men who will need the society's support during their old age. The threat they pose to society is highly exaggerated, as these are most likely immobile poor men at the bottom of society, without the resources to organize or harm others.

Q: Let us now talk about some of the longer-term demographic trends in China. People often say that China is going to get old before it gets rich and that the dependency ratio of the elderly in particular is going to rise to a high level in the not-too-distant future. Can you talk about that?

A: China has become a lot richer in the past couple of decades, especially the last one, but China is already getting older and the question is how much richer will it get down the road. In China, about 9% of the population was aged 65 and over in 2010. When Japan reached that age level, its per-capita income was almost twice the level of China's in 2010. When South Korea reached that point, its income was almost three times higher than China's. So in that sense, China has already grown old and yet is not as rich as the other societies.

What is important is not just individual wealth, but that China's social infrastructure is inadequate, in terms of an equitable and sustainable health care system and a national social security system. This social infrastructure is not yet in place, so China does face a very, very serious situation.

Q: China's growing population has meant that its economy has benefited greatly over the past few decades from a demographic dividend. Now that the working age population has begun to shrink, is that dividend exhausted? Will that be changed as a result of the termination of the one-child policy?

A: Using sophisticated methods to calculate the demographic dividend, which would include not only population age structure, but also productivity and consumption by age, China reached the end of its demographic dividend period last year. Economists have estimated anywhere between 15% to 25% of China's economic growth in the past couple of decades was due to a favorable demographic profile—the demographic dividend—but that dividend has now become zero. In the coming years, China will experience a so-called negative demographic dividend, which will take its toll on China's economic growth rate, assuming everything else stays the same.

Q: Will ending the one-child policy have any impact on this process?

A: No. As we discussed earlier, the magnitude and duration of the birth rebound is not going to be very big, and in any event, over the next couple of decades most new births will increase the size of the younger dependent population rather than increase the size of the workforce.

Q: When you look at other countries that have gone through this demographic shift, what conclusions do you draw about the impact of this shift on China's economic growth?

A: China's economic growth faces many constraints. One of them is the change in population age structure and, in China's case, the change is much more rapid than other countries that have gone through this. There are two broad areas we could look at in terms of economic impact. One is better understood, which is the changing support ratio, or the dependency ratio. China now has a five-to-one ratio of working- (or taxpaying-age) to pensioner-age population (60 and over). But within 20 years, that ratio will be two-to-one.

People point to Japan as an example, with the malaise in its economy in the past two decades; many people increasingly argue that Japan's aging population is dragging down its economic growth. China of course is different from Japan in terms of where its economy is, and how the economy is organized. Demographically, however, China does share similar features with Japan, though change is coming even faster. So I would say that Japan does serve as a cautionary example.