China’s Central Bank (PBOC) paper suggests lowering birth limits

People walk past the headquarters of People’s Bank of China (PBOC), the central bank, in Beijing, China on September 28, 2018.

Jason Lee | Reuters

BEIJING – China could be one step closer to abandoning its controversial childbirth restriction policy.

The central bank released a paper late Wednesday proposing to end the number of children people are allowed to have and suggested that China “fully liberalize and encourage childbirth.”

As China’s population began to age, the Chinese authorities began reversing the decades-old “one-child policy” and allowing people to have two children. However, births continued to decline, declining 15% for a fourth straight year in 2020.

“In order to achieve the long-term goals in 2035, China should fully liberalize and promote childbirth and eliminate difficulties (women’s faces) during pregnancy, childbirth and school enrollment in kindergartens and schools by all means (possible),” said the central bank researchers wrote a working paper in English.

The 22-page document was dated March 26 and shared publicly on Wednesday.

The paper found that the authors’ views do not reflect those of the central bank. However, the call to lift restrictions on births marks the recent high-level discussion on how to address the problems of the aging population in China.

Competition with India and the USA

One of the main concerns of China is the impact of this demographic change on economic development.

In two special sections of the paper, researchers from the People’s Bank of China set out how these demographic problems are economically disadvantageous for the US and India.

“If my country has narrowed the gap with the US in the past 40 years by relying on cheap labor and the bonus of a huge population, what can it count on for the next 30 years? This is worth considering,” wrote the authors in Chinese according to a CNBC translation.

They noted how the US benefits from immigration even as China’s population ages. In the meantime, India’s population and workforce will soon surpass China’s, they said.

From 2019 to 2050, China’s population will decline by 2.2%, while that of the US will increase by 15%, the paper said, citing UN estimates.

The authors added that the percentage of the Chinese workforce is decreasing and will lose its lead over the US over the next few decades.

In 2019, China’s share of the total population was 5.4 percentage points higher than the United States. However, by 2050, China’s share of the workforce will be 1.3 percentage points lower than the US.

China’s aging population

In a plan for economic development for the next five years and beyond released in March, Beijing said tackling the effects of aging is one of its priorities. However, they have stopped lifting a ban on Chinese families from having more than two children.

If there is a little hesitation, (we) will miss the precious time window for birth policy to respond to demographic change and repeat the mistake made by developed countries.

People’s Bank of China Working Paper

Advances in education and technology are not enough to counter the population decline and China should lift restrictions on births, the authors wrote.

“If we hesitate slightly, (we) will miss the precious window of opportunity for birth policy to respond to demographic change and repeat the mistakes made by industrialized countries.”

The paper discussed broadly how serious the aging population is in China than that of the developed world. Specifically, the authors found that developed countries with an aging population tended to be richer with GDP per capita of at least $ 2,000, while China’s $ 1,000 tended to be richer.

And once the older segment of the population starts selling real estate, stocks and bonds to fund their retirement, the ratio will be close to that of a workforce buying those assets, which could lead to increased price pressures, it said Newspaper.

The Chinese authorities are expected to release the results of a once-a-decade census later this month.

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