August 11, 2015

Concern about the low fertility trap, China will go to a two child policy by the end of 2015

China's Academy of Social Sciences released a report "Economic Blue Book: 2015 Analysis and Forecast of China's economic situation." They believe that China's current total fertility rate is 1.4, which well below the generational replacement level of 2.1, has been very close to the internationally recognized "low fertility trap 1.3 "as soon as possible from a single two children to the full liberalization of two-child policy transition.

In the early 1970s, birthrates in China were 4.77 per cent. By 2011 the figure had fallen to 1.64 per cent, forcing the government to deal with a combination of a rapidly aging population, a shallow labor pool and an imbalance between the sexes.

China now has the world’s biggest yet most rapidly aging population. By 2050, China will have nearly 440 million over-60s, according to UN estimates.

China's labor pool of 16 to 59-year-olds has been dropping since 2012, and this has coincided with a downturn in economic growth and a rise in unemployment.

Estimates by Chinese officials and some scholars had suggested the relaxation in policy may lead to an increase of up to 2 million births per year, possibly a 10 percent increase – increasing China’s fertility rate from the current 1.6 births per woman to about 1.8 births per woman.

However, it appears the effect is 30-50% of that level.

If China decided to further relax to a “two-child policy,” the number of additional births might reach 5 million annually, with the fertility rate perhaps rising to replacement level. However, the 30-50% level would mean about 2 to 2.5 million added.

With such a rise in fertility, the medium variant, China’s population would peak at 1.45 billion in 2030 and then decline to around 1 billion by the century’s close.

Fully lifting the child restriction policies now might get the additional 5 million births to reach replacement level.

Here is an analysis of China's population based on changes in total fertility combined with improved life expectancy.

China's child policies now will determine if China has 1.3 billion in 2050 or 1.65 billion

China is expecting at least one million more births in 2015 than last year, as a result of policy changes. A total of 16.9 million new citizens came into the world in 2014, 470,000 more than in 2013, said the China Population Association (CPA) two weeks ago.

As of the end of 2014, around one million couples had applied to have a second child.

Zhai Zhenwu, head of the CPA, said many families are at the preparing stage and the number of newborns is expected to increase noticeably in 2015.

As the birth policy may continue to be eased, the baby boom may last for five to eight years, said Zhai, adding that more efforts will be made in the public service sector to meet the challenge.

After the full two child policy change (plus a complete lifting of any restriction children before 2018 and a shift to incentivizing babies before 2022), I estimate

2020: 1.43 billion
2030: 1.53 billion
2040: 1.6 billion
2050: 1.65 billion

Here is an analysis of China's population based on changes in total fertility combined with improved life expectancy.

Working Age Population (15-64) in 2050

Stanford had a projection of working age population

If population policies in China boost child births from 15 million to 23 million for the next 20 years then the China would have 160 million more working age people in 2050. This would prevent a drop of 110 million and perhaps increase the working age population by 5%. Working age population now is about 970 million.

Other ways to deal with the shrinking working age populations would be to increase retirement ages from 64 to say 74. This would keep the working age population stable in the face of 15% drop in overall population in the 15-64 range.

China also has a lower number of people in the urban areas in more productive jobs today. China is also boosting its more productive college educated workforce.

The overall economic impact would be effected by
* how many working age population
* when do people retired
* how urbanized - China will go from 50% to 70-80% in 2050
* how educated and productive is the workforce
* how much automation and efficiency is there

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