China’s Low Birth Rate Raises Concerns

Read Time:7 Minute, 26 Second

By Alex Yue

In May 2021, the government of China released data from its seventh national census and, at the same time, revised its fertility policy to allow and encourage couples to have three children—a significant reversal of policy from prior decades and a key indicator that China now perceives fertility as a national concern. In 2020, China’s total fertility rate for women of childbearing age was 1.3. According to the World Bank, China has the tenth lowest fertility rate globally. This is an alarming result.

To avoid future population declines, developing countries the size of China must have a real fertility rate of at least 2. The status quo runs counter to China’s goal of curbing stimulating population growth by allowing couples to have two childs five years ago. At the same time, Chinese society continues to age, with 264.02 million people, or 18.70%, aged 60 and older, according to census data—an increase of 5.44 percentage points from a decade ago. China’s further loosening of fertility restrictions was therefore inevitable.

However, this significant loosening of the family planning policy has not eased the dilemma of low fertility intentions among young people. Worse, people’s willingness to marry is also declining year by year. According to a recent study by a research team from the Central Committee of the Communist Youth League of China, the most striking feedback came from those born between 1995 and 2009, with 34% of respondents no longer considering marriage a necessary part of their lives. The most striking data, however, was released on January 17, 2022. The National Bureau of Statistics of China officially announced that the net population growth in China in 2021 was 480,000. It is the lowest point in modern China’s history and less than half of the number reported in 2020’s data.

The financial burden of raising children is the most critical driver behind this phenomenon. The costs of housing, education, and caring for children are often prohibitive. Employment discrimination against pregnant women and working women further dissuade would-be parents.

The current high cost of housing in China is one of the most worrisome factors for young couples. As in many other countries, couples in China tend to live independently, saddled with the belief that they must purchase a new home when they marry. However, housing prices in China continue to rise, especially in large cities. Consequently, young people who lack financial support from their families can be burdened with mortgage payments for 20 or 30 years.

To make matters worse, when couples have children, the pressure on household finances becomes even greater. This is reflected in the popularity of so-called “school district houses,” which are houses with good public elementary and middle schools in the area where they are registered. Children living in a “school district house” will have a better educational environment and development prospects. As a result, demand and competition remain fierce despite astronomical prices. Many couples choose to pay exorbitant rent in these school districts and suffer the corresponding decline in their quality of life compared to other areas.

Slowing the growth of housing prices in China is a complicated process. Earlier this year, China’s President Xi Jinping began pushing for a property tax and other measures to stabilize housing prices, stating that “houses are for living, not for speculation.” Yet housing prices are at the heart of China’s modern economy. Up to 80% of China’s household wealth is tied up in real estate. If real estate values fall, homeowners will feel their wealth shrink and thus be reluctant to spend. Meanwhile, real estate taxes increase the cost of homeownership, placing a potentially greater burden on low-income people. Other policies that favor couples and childbearing, including expanding subsidies for young homebuyers, have been even less effective.

In addition to housing, the other costs of raising and educating children are staggering and continue to rise each year. In China’s maternal and infant FMCG market monitored by Nielsen Intelligence (which tracks prices for pacifiers, bottles, baby diapers, breast pumps, baby food, and infant formula), the entire maternal and infant industry totaled 15.6 billion RMB last year, a year-on-year increase of about 800 million RMB. Meanwhile, Chinese parents have always believed that quality education is the foundation for their children to maintain or make a class leap in the future. As a result, they spend a lot of money on their children’s education, including in-school programming, after-school training in English and other competencies, and holistic learning known as “quality education,” for their children. China’s education and training market is estimated to reach 3.5 trillion RMB by 2023.

Therefore, as part of its efforts to reduce the cost of raising children, the Chinese government implemented a “double reduction” policy for education this year. The double reduction refers to reducing the burden of homework and out-of-school training for students in compulsory education. However, this policy has also dealt a heavy blow to China’s previously booming out-of-school training industry, resulting in negative economic impacts and job losses. Additionally, the policy exacerbated the anxiety of Chinese parents—especially middle-class parents—about a possible lack of quality education, which would lead to a lower-class future for their children. In a 2013 interview, Wang Feng, director of the Tsinghua-Brookings Center for Public Policy Research, said that the region with the lowest fertility levels in the world is the East Asian cultural sphere. Because East Asian cultures have deep intergenerational ties, parents spend too much money and energy on their children, investing in their children’s education with the hope that they will maintain or make the leap up the social ladder. Therefore, as the costs and challenges for children’s future success are growing, East Asian parents, in general, are increasingly disincentive to raise more children.

As discrimination and glass ceilings for working mothers have become commonplace, many women and couples pursuing personal and professional lives are reluctant to have children. To address this, more than 20 provinces, cities, and autonomous regions in China have introduced extended maternity and childbirth leave, with a substantial variance in benefits. The increased break terms vary from two to three months, and localities have also introduced 15 to 30 days of nursing leave for male spouses and 10 to 30 days of parental leave until the child is three years old. However, many women are also concerned that women’s competitiveness in the workplace is undermined when men’s paternity leave is not equal to women’s maternity leave.. Therefore, scholars have also suggested shaping a parenting-friendly environment through policy proposals such as introducing paternity leave into the labor market. In this way, women of childbearing age would not fear that having children could jeopardise their careers. However, even if maternity leave is gender-balanced, many developed countries have long used the same approach to encourage childbearing but achieved little success.

Finally, China’s pension system is becoming unbalanced as the population ages. Many couples fear having children would put them in the worst position in generations, obligated to support the social safety net for the most elderly folks and the most children in history.

In short, the financial burden of raising multiple children is a systemic challenge with implications for housing, living, education, career development, and retirement planning. As a result, China’s low fertility rate is likely to persist for a long time.

If these incentive policies do not work as expected, how else can China’s younger generation be incentivized to marry and have children in the future? The current policy trends are not clear. Some analysts believe that China’s goal of “shared prosperity,” proposed shortly after the three-child policy was introduced, may be a solution. The aim is to strengthen the regulation and adjustment of high incomes and protect legitimate incomes according to the law. At the same time, the central government has several commitments to implement in conjunction with the three-child policy, including a “universal childcare service system,” “supporting measures for finance, taxation, insurance, education, housing, and employment,” and “promoting activity sites and supporting services for infants and toddlers.” The last includes “promot[ing] the construction of activity sites and supporting services for infants and toddlers” and “strengthen[ing] support and guidance for infant and toddler care.”

To achieve the “three-child policy,”, the Chinese government must make long-term adjustments and apply new approaches in several areas. This will be a challenging and protracted battle. Fortunately, the responses of developed countries like South Korea and Japan can serve as useful references.. At the same time, China also faces the challenge of expanding economic prosperity in the face of an aging and shrinking population. The challenge of increasing fertility rates looms on the horizon, carrying widespread implications for the whole of Chinese society.