Welcoming more kids not enough

Welcoming more kids not enough

As the year comes to a close, it's worth taking a look back at one of China's major policy decisions in its efforts to address a slowing economy and a growing demographic challenge.

That is China's plan to end its highly contentious "one-child policy," dating to the late 1970s. Yet, a "two-child policy" like the "one-child policy" of population controls remains a powerful symbol of China's efforts to control its people.

The decision will allow all Chinese couples as of Jan 1, to have two children. Investors and financial markets responded to the initial announcement in October. Companies seen as benefiting from the change saw their share prices jump.

"Almost all companies related to child-raising, including baby formula producers and maternity garment makers, saw their shares rise by the daily limit of 10%, or close to it," China Daily reported in the immediate aftermath of the announcement. "Mead Johnson, Danone, Nestle and Synutra -- Foreign milk powder companies doing business in China -- rose 3.77%, 1.52%, 0.33% and 5.04% respectively in anticipation of more births in the world's most populous country."

Maternity medical care, baby food, kids' clothes, toys and other entertainment for children could well be winners should a Chinese baby boom indeed ensue.

The pressures leading to the policy change are clear. The change was "intended to balance population development and address the challenge of an ageing population", the official Xinhua news agency reported.

China now faces a slowing economy, a rapidly ageing population and a dramatically shrinking workforce. While China's population is nearly 1.37 billion, its working-age population -- defined as 15- to 64-year-olds -- is actually dropping. Demographics now constrain China's once rapid growth.

This is just one unintended consequence of the nation's drastic one-child policy, and its at times brutal enforcement. By 2030, China is expected to have more than 243 million people over the age of 65 -- an 85% increase over today.

Yet, China is likely to find that policy pronouncements are insufficient to change anytime soon the social norm of a single child. As China's citizens move up the income ladder, payouts and penalties are likely to have less and less power to change behaviour.

That's one clear lesson from across Asia. As nations have grown wealthier, more and more of their citizens have delayed having children, or any child at all, focusing on careers and other goals first.

When it comes to that most personal of decisions -- how many kids to have -- Singapore's struggles to first lower and then spur a higher birthrate are particularly instructive. Government policies even from the most effective of governments do not necessarily generate the envisioned results.

In the 1960s and 1970s, as Singapore began its own march to developed nation status, government officials were worried about a growing population overwhelming the job market, housing, healthcare facilities and other infrastructure. A government campaign followed, with a core message: "Girl or Boy -- Two is Enough."

The government legalised abortion, offered cash incentives for voluntary sterilisation and disincentivised having more than two children.

By the mid-1980s, the government campaign to persuade parents to "Stop at Two" children proved too successful. Labour shortages were projected. And officials changed tack and now offered financial incentives to encourage parents to have three children. Those "who can really afford it" were encouraged to have more.

Special tax rebates, child-care subsidies and prioritisation for government-subsidised housing and the removal of earlier disincentives that discouraged more than two children followed.

Now, decades later, Singapore still struggles to address workforce issues. A richer Singapore has developed a preference for small families that has proven resistant to change. And yet, Singapore still evolves and succeeds -- ranking as the No.1 place in the world to do business, according to the World Bank.

So too is likely to be China's challenge: how best to evolve to address shrinking workforces and growth rates. Rethinking and harnessing the potential of what an "ageing" population can contribute is one step.

Changing to a two-child policy is not enough. As China has found with its stock exchanges, human behaviour -- like market forces -- cannot be fully controlled or predicted, even by the most powerful bureaucrats of Beijing. A more confident China would understand that, and allow its citizens to live as they choose, and to compete, to fail and to succeed on their own.

Curtis S Chin, a former US Ambassador to and member of the Board of Directors of the Asian Development Bank, is managing director of advisory firm RiverPeak Group, LLC. Follow him on Twitter @CurtisSChin.

Curtis S Chin

Managing director of advisory firm RiverPeak Group

Curtis S Chin, a former US ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group, LLC.

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