5B.Reasons for China’s Falling Birth Rate in Economics

Reasons for China’s Falling Birth Rate in Economics

According to China’s population data for the past ten years, the birth population were around 16 million people from 2003 to 2013. Only when in 2016, the birth population increased to 17.86 million people as the government introduced the “Two-Child Policy”. However after that year, the birth population was unsustainable and dropped to only 10 million people last year. Why did the birth rate drop and what is the impact? These problems will be discussed below.

As per the data released by the Chinese government on 8th February, new born babies in 2020 dropped by 15% from 11.79 million babies in 2019. In richer cities, the birth rate even dropped over 30%. It is expected that China’s overall population may experience a negative growth in future.

Wealthier Society Increases Opportunity Cost

The decline in population may be related to the income factor of the Chinese society. When people were at poverty in the past era, there wasn’t much to consider to give birth. Since income was limited, the non-monetary cost forgone to give birth was very low, such as time cost. This was especially true in farming villages, while most income arise from selling one to two times of harvested crops. Female farmers continued to farm as their physical conditions allowed. But in the modern society, female may need to stop working during the pregnant leading to an decrease in the time interval between two successive income receipts. The suspension in income during pregnant time (except for those workers who have maternity leave) has been causing the income level to be more volatile, and causing an decrease in birth rate.

On the other hand, life expectancy of babies is low when minor illnesses can be fatal in society with low medical standards. As giving birth to a child is barely an increase in labour force in short term, parents may not be paying too much monetary cost to raise the children.

In contrary, the cost of education, medical care and food increase significantly in nowadays society, giving Chinese parents much more factors to consider than in the past. According to the statistics from Shenzhen Securities Times in 2018, the nurturing cost (from birth to university) in “first-tier cities” such as Beijing, Shanghai, Guangzhou and Shenzhen was as high as 2.76 million dollars, 2.47 million dollars, 2.16 million dollars and 2.01 million dollars respectively. Therefore, taking Guangzhou as an example, the number of new born babies in 2020 dropped to a ten-year low, with only 195,000 babies born which was 33% less that in 2017. Even when the “One-Child policy” was relieved, the birth rate was not doing any better.

It is also worth to know that as the pandemic continues, this will also drive the younger generations to have a negative outlook to the future which thus reduce the desire to have children.

Insufficient Working Population Creates Various Social Problems

China will soon be facing a severe problem of aging population as birth rate decline significantly. Statistics show that China’s population aged 65 and above will account for 20% of total population in 2035, and reaching the peak at 34% in 2050. Various social problems arise as labour force become insufficient.

In terms of simple production function, the output level has a positive relationship with the labour force. No place with negative grow on population can main a positive economic growth. The Chinese government may consider to loosen the immigration policies so as to slow down the negative population growth.

Selected Concept

Opportunity Cost

Opportunity Cost is the highest-valued alternative forgone from the choices of decision-making process.

Time Interval between Two Successive Income Receipt

The time difference between the first and second income obtained by the labour from selling factor services.

Labour Force

Labour Force refers to the land-based non-institutional population aged 15 and over who satisfy the criteria for inclusion in the employed population or the unemployed population

(P.S. The definition above is provided by the Census and Statistics Department of Hong Kong; the definition may vary from place to place)

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