The Change for Chinese Demographic Policies and Their Effect on Economic

The change for Chinese Demographic Policies and their effect on economic

Yuxin (Zoe) Deng 1120133150 Fertility, as the way for population reproduction, is subjected to the condition of social and economic development level. The fertility level depends on the cost and benefit of raising kids.

The population growth and the economic development are interacted with each other. People will evaluate the benefit for have a new baby no matter whether it is conscious or unconscious. In rapid growth or industrialized areas, the population growth naturally slow down and become very low, and that number in some regions even equal or below zero, such as Japan and U.S; the pattern to a certain extent promoted the economic development. However, in some undeveloped areas and agricultural areas, people are more willing to have more babies because they hope that they can benefit from the number of children. But this phenomenon limits the economic development in most of the circumstance.

Demographic changes can both positively and negatively affect regions development. Although, the fertility has its self-regulation mechanism to maintain a suitable level depend on the current economic level. However, it may lose control or distorted by other effects. So appropriate demographic policies can help the fertility to maintain a properly level to maximize its good affect as well as eliminating bad ones.

For China, how to set up an appropriate demographic policy is very important, because Chia has a very large population, which would greatly influence the economic and social development and the sustainability development.

After the Republic of China established until now, there are three main demographic policies in China, fertility encouragement policy, one-child policy and two-child policy.

The fertility encouragement policy

Before 1980, there is no control for population as well as encouraging having more babies. This politic tendency contributes to Chinese’s big population dividend to the past three decades. A country’s economic growth and asset prices are closely related with population structure and population quantity: during demographic dividend period, the ratio of a country’s working-age population is high and workers have high saving anticipation, in return lower the cost of labor and cost of capital (interest rate), which then promote economic growth and asset prices increase.

The population of labor(thousand) Labor population growth rate.

Table one:1950-2050 Chinese population of labor and labor population growth rate

Source: CICC Research Department

Although this encouragement policy left great population dividend for the next generation, but it also arose huge potential risk for Chinese society and economic at that time. Because the sharply increasing population had already

[pic 1] 

surpassed the level China can suffer. It is very hard to allocate the national resources. Many people struggled for living for the basic living condition. At that time, China has low productivity and low level of economic development, in order to get rid of this bad situation, government encouraged citizens to have more babies, hoping the increase of population quantity can enhance the economic development. However, the policy didn’t realize its conceive, and in return, adversely put much pressure for national resource and capital distribution, because the low productivity cannot fulfill such a huge number of people. Having more babies otherwise made the family poorer and this phenomenon made a bad effect in return. If the government didn’t take action to change this condition, the large quantity of population would become a huge burden rather than population dividend.

So at this time, the government choose the one-child policy to solve this problem.

One Child policy’s pro and cons.

From 1980 to 2015, the one-child policy was issued and came into effect to whole country. This policy last for about 35 years, which effectively control the fertility level for one generation and made contribution to different dimension of society. The one- child policy has both directly and indirectly made great influence on Chinses economy in the following part.

First off, one-child policy liberated Chinese women and promote the equality of women, which then propel the feminine economic and provide women workforce for the labor market. Before 1980s, women’s social status was greatly lower than men and one of the major role for women was fertility and take care for kids. It is very common for a country family to have kids around five. In the rural area, the number even high to seven kids per family. And Chinese women suffered seriously unequal status because of traditional Chinese misconception that men are superior to women. The implement of One-child policy changed this unfair condition in great extent. The family put the same weight on girls’ growth, which enjoy the same status as boys in family

and gained more chances to access to high education. This phenomenon liberates Chinese women workforce and changed the economic structure. More and more women entered into the work market and changed from the first industry to second and third industry, providing suitable workers for these industries, especially for services industry and finance industry, and optimizing the employment structure. Recently, McKinsey Global Institute issued a report shows that Chinese female labors’ productivity accounts for 41% of the Chinses Total GDP. Chinese female labors play a vital role in Chinses economic. And the female consumption has increased a lot in recent years and made great contribution to many industries such as cosmetic industry, clothing industry, travelling industry and children-related industry.

Secondly, it helps to unwind the pressure for resource and capital distribution. While the control of fertility level, the society average productivity also raised. The one child policy efficiently controlled the Chinese population and fertility rate, and put them into a suitable level when confront the national resources distribution. This phenomenon means that each people can consume more resources after the one-child policy and then in return to stimulate the consumption.

Thirdly, because there is only one child in a family, the only child becomes more valuable for their family. The majority resources and capital of each family are put into the only child in this family so that the only child is able to benefit lots from it, when the reduced possibility for another child to share. At this time, the one child policy indirectly changes Chinses people’s consumption behavior. Chinese people always persist the idea for diligent and thrifty, owning great number of deposit. But after the implement of one-child policy, the whole family tend to focus on the only child, there is a greatly increase for expenditure on children. Under this relatively loose and comfortable growth condition, the only child generation cultivate the new consumption behavior that no longer like before focus on the diligent tradition. A majority of them are willing to consume and more willing to use credit payment, this phenomenon contributes to substantial consumption and pushes the economic