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reflections

Nov 29, 2012 | 07:59 GMT

5 mins read

China's Downward Spiral

(Stratfor)
It can be difficult to separate the important from unimportant on any given day. Reflections mean to do exactly that — by thinking about what happened today, we can consider what might happen tomorrow.

The Chinese government is reportedly considering gradually relaxing aspects of its one-child policy in an effort to counteract China's slowing population growth and aging demographic profile. The proposed changes would allow urban couples to bear two children without paying a fine, regardless of whether they themselves are only children. In reality, however, with these changes Beijing would simply be acknowledging that the one-child policy is an archaic program that has long outlived its initial purpose — to prevent China’s population from rising more quickly than its food supply — and is a political liability.

What is a Geopolitical Diary? George Friedman explains.

In 1979, the one-child policy was deemed necessary to stem the growth of a population that had nearly doubled (jumping from 540 million to 940 million people) between 1949, the year the Communist Party came to power, and 1976, the year Communist leader Mao Zedong died. In the years since, China's population growth has slowed dramatically. Between 2001 and 2010, the growth rate fell to an annual average of 0.57 percent, less than half the previous decade's rate and about a fifth that of the 1970s. Underpinning this decline is China's extraordinarily low fertility rate, which as of 2010 measured just 1.4 children per mother. This number is lower than the average for developed countries (1.7 children per mother), and significantly below fertility rates in countries like the United States and France (which both average around 2.0 children per mother).

The one-child policy certainly played an important role in bringing the fertility rate down in the 1980s and 1990s. But in recent years, a much deeper transformation of the country’s social and economic fabric has far eclipsed the policy as a critical factor shaping China's demographics. China's gross domestic product is now 14 times larger than it was in 1992 and nearly five times larger than it was a decade ago. In that time, per capita gross domestic product went from $400 to more than $5,000 — and it is significantly higher in most major cities. At the same time, the cost of living has skyrocketed and in many cases far outstripped wage growth. Meanwhile, the cost of primary and secondary education in major cities is exorbitant, and real estate prices have ballooned. Average property values in cities like Beijing, Shanghai and Guangzhou are currently 13 to 15 times higher than the average annual salaries being paid in those same cities. Consider these realities, and a new picture begins to emerge. Urban Chinese are having fewer children not because of the one-child policy, but because the cost of providing for children leaves only the very wealthy — or the rural poor, for whom restrictions have long been more lax — with the ability to have more than one.

But that's only the beginning. In addition to the small fortune required to raise a child in large Chinese cities, young Chinese face the prospect of caring for their parents' generation, a group of 180 million citizens whose life expectancy has nearly doubled in the last 50 years. The number of elderly citizens is set to grow, to 240 million by 2020 and 360 million by 2030. And as China's elderly population grows, its workforce will shrink. By 2030, more than a quarter of China's population will be more than 60 years old. Between 2010 and 2020, the number of people aged 20 to 24 will fall by an estimated 20 percent, from 116 million to 94 million. Meanwhile, the proportion of 30- to 50-year-olds (the savers whose capital will be relied on to support China's ballooning health care and social security needs) will fall from 50 percent of the population to 40 percent of the population by 2030.

Countries like Japan and South Korea already may be facing these challenges, but they enjoy much higher per capita purchasing power. China's population is 10 times that of Japan, and while some segments of that population are urban and relatively prosperous, others are rural and poor. They are all aging at slightly different rates and none of them are prepared for what's coming.

Policymakers in Beijing, aware of the mounting challenges, have discussed loosening the one-child policy for years. As it stands, loopholes and inconsistencies in enforcement abound. But against this demographic backdrop, it is unclear how effective even a wholesale relaxation of the policy would be in correcting the country's downward demographic spiral.

Relaxing the policy may help reduce the myriad underlying social tensions — and the potential for future social unrest — that seem to stem from it. Some of those tensions are structural, such as the rising gender imbalance in many parts of the country, especially in rural areas, where there are often 120 men for every 100 women. Others result from the policy's uneven and often clumsy enforcement, as seen earlier this year after pictures of a young woman who had been forced by local authorities to have a late-term abortion circulated widely on social media platforms such as Weibo.

Ultimately, any move to adjust or eradicate the one-child policy is little more than an acknowledgement that the state is no longer driving China's demographic trends. But as with many of the challenges China's leadership faces, gradual policy adjustments will not be enough.

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