Ambassador (retd.) Kishan S Rana, Honorary Fellow, Institute of Chinese Studies.
China’s decision to permit all families to have two children, announced on 29 October 2015, was long in coming. It was preceded by a concession earlier in that year, allowing those parents that were single children themselves to opt for a second child, after permission. The simple rationale behind all this has been a precipitous fall in the total fertility rate (TFR) (i.e. the average number of children per woman in her lifetime); this is now at 1.55, i.e. significantly below the ‘replacement rate’ of 2.1, which is what is needed for a stable population. This has several implications and consequences.
- The natural sex ratio is 105 girls for 100 boys; perhaps that mismatch is nature’s way of providing a few more women for procreation. Given the propensity of traditional families, especially in Asia, to prefer boys to girls (a phenomenon well known in India, China and elsewhere), an aggressive birth control policy skews the ratio when parents deliberately opt for male heirs. In China the current ratio is 116 boys for 100 girls, higher than India’s 113 to 100. One consequence, which we also see in India, is a shortage of partners for many males. In China those that cannot find wives are called ‘bare branches’. One report: China had 34m more males compared with females. (CNN, 31 March 2015). Indian press reports indicate that in some better off states in North India (where a shortage of potential brides is acute), women are brought in from poorer states such as Bihar, despite difficulties over language and customs.
- In history, in all countries the application of modern medicine, improved nutrition, and better life styles produces first a relatively steep fall in death rates, and later, after a delay of an average of 30 years or so, a gradual decline in birth rates. This is known as ‘demography transition’. This interregnum is a phase that is marked by what is called a ‘demography dividend’, when that gap leads to an increase in the number of people of working age, in comparison with those that are dependents, i.e. infants and children, and the aged. Thus, during the ‘dividend’ phase, the dependency ratio falls, and that is potentially a good thing, as more people are available as a domestic productive resource, giving a boost to economic growth. A major economic consequence of China’s successful birth control policy has been that the ‘demography transition’ has been accelerated in China. Thus, up to about 2013, China gained through a lowered dependency ratio (and this was a factor in its high growth, the more so as it was coupled with a migration of labor from rural to urban areas). The Economist of 23 June 2013 indicated (summary): Over the next few years China will undergo a huge demographic shift. The share of people over 60 in the total population will increase from 12.5% in 2010 to 20% in 2020. By 2030 their number will double from today’s 178m. The overall population will start to grow faster than that of working age. One trigger for this could be a sharp economic slowdown. Many Chinese have recently become familiar with the “Lewis turning point”, named after a 20th-century economist from St Lucia, Arthur Lewis, who said that industrial wages start to rise quickly when a country’s rural labor surplus dries up. Was that prescient?
A consequent post-2013 labor shortage that is developing in China is offset by a slowdown in economic growth, but further down, this sharp rise in the dependency ratio will have its impact. It can be offset by a rise in productivity, which is also a phenomenon underway in that country. That is to say, a relative shortage of labor produces a technology shift to higher automation, that is a good thing, provided both technology and capital exist to permit that shift. This is happening today in China, to an extent, going by episodic reports.
- In net terms, China will face a declining population. The ‘when’ of that is unclear. The deputy head of China’s National Health and Family Planning Commission, Wang Peian said that China’s population will peak at 1.45 B in 2029 (Business Standard, 21 December 2015). A forecast for Japan, which is an extreme example of a demographic shift, estimates that Japan’s population will drop from 127m to 87m by 2060. Nearly 40% of the total will be over 65 (The Economist, 27 June 2015). Since 2014, Japan has a cabinet position for ‘overcoming population decline and revitalizing local economies’.
- Immigration is not a practical option in many countries, which are marked by highly distinctive cultures and language, and do not easily absorb migrants, unlike North America for example. That is Japan’s dilemma, and applies to China as well. The story of the slow integration of Vietnamese of Chinese descent, who moved to the Guangdong province in the 1970s following China-Vietnam political tension is well-known.
- A UN Population Division report said: China ‘faces a period of ultra-low fertility, regardless of what happens to its one-child policy’. It postulated that population which was then 1.34 billion, will fall to 1.3 billion by 2050; but by 2060 it will fall to below 1 billion. One should note that such forecasts do not take into account all variables and cannot be treated as more than indicators, especially if they look too far into the future. (The Economist, 21 April 2012).
The essential question: might the new two-child norm produce a rise in the fertility rate? Most demographers believe that this relaxation has come too late; in terms of social behavior, a demography shift has taken place. Most parents do not now want more children, for reason of cost, and lifestyle choice. (In Germany, way back in 1992, a couple blandly told me at a lunch that they had to decide between a second child or a new car and they opted for a car). Some will opt for a second child, but that may not do more than nudge up slightly the rate slightly higher than the current 1.55. But some projections are optimistic; one postulates that the TFR will start a gradual rise by 2020, and reach 1.9 by 2100. India’s TFR, currently 2.5, which has long been in gradual fall, is forecast to go below 2.1 in 2030. In 2055, both India and China will be at 1.8, when the Indian figure will gradually fall further, while China’s will rise, reaching close to 2.0 by 2100. India may then be at 1.85.
Source: United Nations, Department of Economic and Social Affairs, Population Division (2011): World Population Prospects, the 2010 Revision. New York.
The core of India’s problem is that while it enjoys a demography dividend on paper, in that the working age population is growing, and a decline resulting from demography transition will come only after 2030, it has to find jobs for them. Simply put, this is at the heart of India’s development challenge. A forward-looking, ambitious program for ‘Skilling India’, currently underway is vital, but it has come 20 years too late. China’s good fortune, or Deng Xiaoping’s vision, was that its’ economic surge coincided with its golden demography dividend days, and training programs were in place for the rising job seekers. Indian policy planner economists, tom-tommed our demography dividend in the 1990s; they overlooked the vital need to create a skilling infrastructure.
Some caution is also needed. Population projections are no more than estimates, reflecting the opinions of demographers – little real scientific evidence can really be adduced to supports these. For all the claims made at scientific analysis, they project into the future the wisdom of the day. And that shifts as ideas evolve. [Note: please also see The Economist, 7 November 2015.]