In an Attempt to Stop Birth Rate Decline, China Endorses Three-Child Policy

China's slowing population growth rate and rapidly ageing population have long since become a cause for concern for policy makers worried about its impact on the economy.

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Beijing: China’s national legislature on Friday, August 20 formally endorsed the three-child policy mooted by the ruling Communist Party, in a major policy shift aimed to prevent a steep decline in birth rates in the world’s most populous country.

The revised Population and Family Planning Law, which allows Chinese couples to have three children, was passed by the standing committee of the National People’s Congress (NPC).

In an apparent attempt to address the reluctance of Chinese couples to have more children due to mounting costs, the amended law has also includes additional social and economic support measures to address these concerns.

The new law stipulates that the country will take supportive measures in finances, taxes, insurance, education, housing and employment to reduce families’ burdens. Measures will also be taken to reduce the cost of raising and educating children, state-run newspaper China Daily reported.

The NPC has revised the law to implement the central leadership’s decision to cope with new circumstances in social and economic development and to promote balanced, long-term population growth, the report said.

In May this year, the ruling Communist Party of China (CPC) approved a relaxation of its strict two-child policy to allow all couples to have up to three children.

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China had permitted all couples to have two children in 2016 when it scrapped the draconian one-child policy which had existed for decades and which policymakers blame for the demographic crisis in the country.

Chinese officials claim that the one-child policy implemented for over three decades had prevented over 400 million births.

The decision to allow couples having a third child came after the decadal census, published this month, showed that China’s population grew at the slowest-ever pace to 1.412 billion. Official projections show that the population decline may begin as early as next year.

The new census figures revealed that the demographic crisis in China was expected to deepen as the population of people above 60 years of age grew to 264 million, up by 18.7% from last year.

As calls for the government to do away with the family planning restrictions grew louder, fuelled by concerns that the declining population in the country could result in serious labour shortages and negatively impact the world’s second-largest economy, the CPC decided to permit a third child while declining to completely scrap the family planning policy.

“Data shows the ageing of the Chinese population has further deepened, and we will continue to face the pressure to achieve a long-term balanced population development,” Ning Jizhe, head of the National Bureau of Statistics (NBS), said while releasing the census figures on May 11.

The two-child policy failed to encourage couples to procreate more and few couples opted to have a second child, citing the heavy expenditure involved in raising the children.

The poor response made Liang Jianzhang, professor at Peking University’s School of Economics, suggest that the government offer parents one million yuan (USD 156,000) for each newborn child to shore up the country’s declining birth rate.

Dan Wang, chief economist at Hang Seng Bank (China), said the three-child policy will have a positive impact on China’s birth rate, but not as much as the authorities are hoping for.

The high costs of housing and education as well as a lack of job protection for women are strong economic constraints on having children, she said, adding that the cost of having a third child would be too high for most middle-class families.

The declining trend prompted Chinese demographers to predict that India – which had an estimated population of 1.37 billion in 2019 compared to China’s 1.43 billion – may overtake China earlier than the United Nations projection of 2027 to take the top spot as the most populous country in the world.

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India is expected to add nearly 273 million people between now and 2050 and will remain the most populated country through the end of the current century, the UN report said in 2019.

Lu Jiehua, professor of sociology at Peking University, said that China’s population may peak by 2027 before it starts to decline. Some demographers believe the peak may come as soon as 2022.

China is also facing the risk of falling into the trap of low fertility as it recorded only 12 million births in 2020, marking a drop for the fourth consecutive year. China’s total fertility rate of women of childbearing age was 1.3, a relatively low level.

A report this year by China’s central bank, the People’s Bank of China (PBOC), said that the demographics of China were set to change as its population growth is set to enter the negative after 2025, resulting in a shortage of consumer demand.

“When the total population enters negative growth [after 2025], there will be a shortage of demand. We need to pay attention to the impact of demographics on future consumption,” said Cai Fang, a member of the monetary policy committee of the PBOC.

The PBOC study said China should immediately liberalise its birth policies or face a scenario in which it has a lower share of workers and a higher burden of elderly care than the US by 2050.

It said the country should not interfere with its people’s ability to have children or it will be too late to reverse the economic impact of a declining population.

China is also eyeing a progressive, flexible and differentiated path to raising the retirement age.