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China plans to end birth controls as demographic time bomb ticks

Baby bust pushes Beijing to reconsider decades-long policy

China's steps to loosen birth restrictions have done little so far to lift the country's birthrate, even as Chinese live longer.   © Reuters

BEIJING -- Chinese policymakers are considering dismantling the country's decades-old family-planning rules as births continue to fall despite last year's decision to allow couples to have up to two children.

Beijing fears that the decreasing birthrate will leave too few young people to bear a projected surge in social welfare costs for an aging population. But it is unclear whether abolishing birth controls alone will be enough to defuse the demographic time bomb.

In late September, the people's congress of China's southernmost province of Hainan proposed changes to a local birth control ordinance, calling for the removal of some penalties for having over-quota children. As changes to major government policies usually start at the local level, the move may herald the dismantling of family planning for the entire country.

According to the Communist Party mouthpiece People's Daily, the National People's Congress -- China's parliament -- is deliberating amendments to civil law that would delete expressions referring to "execution of family planning." The bill is expected to pass as soon as March 2020.

Meanwhile, the National Health and Family Planning Commission, which oversees birth control policy, has been renamed the National Health Commission.

"The next step will be abolishing birth restrictions, rather than adopting a 'three-child' policy," according to a demographer involved in China's government policy. Some also think that Beijing may first stop enforcing restrictions on births and monitor the impact for a while before dismantling the rules.

China introduced the one-child policy in 1980. Based on its 2010 census, the country's annual births dropped sharply from 28 million in 1990 to 14 million in 1999.

The country's fertility rate -- the average number of children a woman is expected to have over her lifetime -- fell to 1.18 in 2010, down from 2.75 in 1979.

In 2013, China allowed married couples to have two children if either parent is an only child. Two years later, the country decided to relax birth restrictions further. The new two-child policy kicked off in 2016, with the National Health Commission expecting annual births to recover to at least 20 million. The estimate proved optimistic.

Although births increased 1.31 million in 2016 over the previous year to 17.86 million, they quickly fell to 17.23 million in 2017, a setback blamed on the decreasing number of women of childbearing age.

Women between the ages of 22 and 31 in China are set to drop nearly 40% between 2015 and 2025.

2025 is the year when women born from the 1990s to the 2000s, a period during which births plummeted, will reach peak childbearing age. Adding to the problem is the fact that parents' preference for boys under the one-child policy has resulted in 10% to 20% fewer women than men.

China's leadership fears the consequences for the country's ballooning public pension payments. The money taken in by the pension system will not cover payouts, which required about 640 billion yuan ($92 billion) in government spending in 2016, up 140% from five years earlier.

China's public pensions are managed by each province. In Heilongjiang Province, low birthrates and an aging population have already dried up the pension fund.

An estimate published in 2012 by experts, including Ma Jun, who helps manage monetary policy for the People's Bank of China, projected pension liabilities hitting 60 trillion yuan annually by 2050 if measures to boost the birthrate and limit benefits are not taken.

In that year, the estimate says, pensions payouts will account for more than 20% of all government spending, a dramatic increase from the 3% in 2016.

The working-age population -- people aged between 15 and 64 -- shrank for four years in a row after peaking in 2013, as people born in the 1990s, when the decline in China's birthrate accelerated, entered the workforce.

China's factories and restaurants are already feeling the pinch due to more people pursuing higher education, after which they eschew low-paying service jobs. Now, the declining working-age population is becoming a drag on economic growth.

But just dismantling the birth control framework will not do enough to increase births, analysts say. James Liang of Chinese travel services provider Ctrip, cited other factors behind the country's declining birthrate. "In China, property is expensive and day care centers are not easily available for children."

"Like other countries, China will also start encouraging births in the future," Liang said, adding that China needs to spend 5% of gross domestic product on this effort. He proposed increasing nursery schools and reducing social insurance premiums for households with children.

While the birthrate has been declining for some time, policy change has been slow in coming. This is because the previous National Health Commission said that parents do not report the actual number of children they have for fear of being fined.

Even including these unreported children, China's actual birthrate is widely believed to be low. It is "only around 1.3," Liang said, a figure far below the 2.1 rate needed to maintain the country's population.

If the birthrate hovers around 1.3, China's population will shrink to about 600 million by 2100. This means that China's population will peak at just over 1.4 billion in the 2020s, and more than halve in just under 80 years -- not a good omen for the health of an economically ambitious country.

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