The great greying of China

The great greying of China

Context:

• The article examines the effect of China’s one child policy (OCP) on its population structure and the economy.
• China’s one child policy (OCP) was conceived by Deng Xiaoping in 1979.
• The one-child policy was part of a birth planning program designed to control the size of the rapidly growing population of the People’s Republic of China. It set a limit on the number of children for a couple.

Impacts of OCP:

• The total fertility rate in China has fallen to 1.6 births per woman in 2017, much below the population replacement rate of 2.1. This would imply that the absolute population would decrease over time.
• Total fertility rate (TFR) refers to the total number of children born or likely to be born to a woman in her lifetime if she were subject to the prevailing rate of age-specific fertility in the population.
• In India, the average birth rate stands at 2.24.

Impact on child sex ratio in China:

• Fewer children are being born and of them, fewer were females given the preference for boys in Chinese society. This would have an adverse impact on the sex ratio.
• There are concerns that skewed sex ratios lead to more violence against women, as well as result in human-trafficking.

Childbearing attitude of Chinese

• Despite the raising of the limit to two children in 2016, the number of new born has not improved in China and has slipped to the pre-2016 level.
• The one child policy has had a negative impact on China’s child-bearing attitudes as many young couples do not want to have two babies for economic and lifestyle reasons.

Old aged people

• The proportion of China’s population aged above 65 years would increase from 10% in 2010 to 32.6% in 2050 (corresponding figures for India are 5.6% and 14.2%).
• China will need huge expenditures on health, social welfare and pensions.

Economic impact on China

• As against the popular perception that the population decline will help create a richer society in China, it is very much possible that the country’s aging population will incrementally impede its economic growth.
• The available labour force (aged between 20 and 64) will reduce from about a billion in 2017 to 787 million by 2050.
• The fall in the number of people in the labour force will lead to a decline in manufacturing, exports, and also mean lower revenues for the government.
• The higher dependency ratio will reduce the savings rate and subsequent investment rates in the economy.
• This could impede Chinese attempts to increase their annual per capita income to the levels of rich countries like the United States, Singapore, Japan and others.
• In the last 70 years, only 15 countries have managed to climb from middle to high-income status, e.g. Singapore, South Korea, Taiwan.

Way forward:

• Developed countries too have faced the problem of an aging population. Example: Japan and Germany.
• Developed countries have reduced the impact of the declining population by raising the total factor productivity (TFP) growth rate.
• Total factor productivity (TFP) is a measure of productivity calculated by dividing economy-wide total production by the weighted average of inputs i.e. labour and capital.
• It represents growth in real output which is in excess of the growth in inputs such as labour and capital.
• Shifting human resources from primary economic activities like agriculture to the more productive sectors like manufacturing and service sectors.
• Reforms in the various sectors of the economy to make them more efficient.
• Improvement in governance which could help ensure ease of doing business.
• Improvement in education and skill levels of human resources.
• Increasing use of technology in the development process.