Nicholas Eberstadt: China’s Coming One-Child Crisis; A minor tweak in Beijing’s population controls will not prevent a demographic crash

Nicholas Eberstadt: China’s Coming One-Child Crisis

A minor tweak in Beijing’s population controls will not prevent a demographic crash.

NICHOLAS EBERSTADT

Nov. 26, 2013 7:19 p.m. ET

Vladimir Lenin, the founder of the Soviet state and godfather of modern totalitarian politics, once explained the totalitarian worldview this way: “We recognize nothing private.” By that criterion, no totalitarian project in our era has been more ambitious than the Chinese government’s policy of forcible population control. Since the institution of the so-called One Child Policy in 1980, China’s Communist Party has demanded mastery over that final and most intimate of all private spheres, the family.Forced sterilizations, involuntary abortions, female infanticide and untold other family tragedies have been ruthlessly routine aspects of the national plan to drive down childbearing to meet the state’s birth targets. Despite recent news reports trumpeting an official easing of the policy, the changes were inconsequential—and China’s demographic future remains dire, not just because of the One Child Policy’s ill effects.

What Mao might have termed the “contradictions” of this population-control policy have markedly intensified over the past three decades as China’s market-oriented reforms increased autonomy and personal control over other aspects of life. While China today is awash with a general social anger over government corruption and the lawlessness of the nation’s rulers, no single state policy is so widely and deeply hated.

Meanwhile, Chinese scholars, demographers and economists have grown increasingly outspoken about what they describe as the irrational and counterproductive consequences of the population policy. Even the government’s top think tank, the Development Research Center of the State Council, has publicly issued such criticisms.

The Communist Party’s “open letter” that announced the One Child Policy in 1980 also proclaimed: “After 30 years, the currently very intense population growth problem will be eased, and different population policies can be adopted”—a seeming pledge that the program would only be temporary.

All this gave rise to hope that a major change in China’s population-control project was imminent—and might be announced by President Xi Jinping at the Nov. 9-12 Third Plenumof the Communist Party’s Central Committee. What the regime promulgated, however, was a relatively minor adjustment. Couples would be allowed to have two children if just one spouse is an only child, instead of both spouses as the policy was previously. No time frame was given for the rollout of this adjustment, which reportedly will be introduced in selective “phases” in different regions of the country.

Beijing’s population planners expect the revision to have only a limited demographic impact. According to a widely quoted official estimate, about a million extra births a year are expected. In the context of the current 16 million or so annual births, that would amount to a paltry fertility increase of maybe around 6% for China. (No one knows the precise current birth figure, in part because so many parents still try to conceal out-of-quota babies.)

The day after the new birth directives were announced, the Chinese state news agency Xinhua ran the headline “Birth policy changes are no big deal.” Beijing did not significantly “reform” population control. Rather, it just reaffirmed its coercive program with one minor and relatively insignificant change.

But why? China today faces staggering demographic problems, including a shrinking pool of working-age men and women and a rapidly aging population that will slow economic growth, perhaps severely. The traditional family structure will be tested by, among other things, a growing army of unmarriageable men, a consequence of rampant sex-selective abortion in the One Child era. To the extent that the policy has “succeeded,” it has made each of these demographic problems more acute.

Yet even if Beijing repudiated all forms of population control tomorrow, these problems would persist for the generation to come. Practically everyone who will be in the Chinese workforce in 2030, or the Chinese marriage market in 2035, has already been born under the current restrictions. No variations in population policy today can change this part of the country’s future.

The question that should be keeping Communist Party leaders awake at night is: Can Chinese fertility levels recover if and when the controls are abandoned? Alas, the answer to that existential question is not at all clear.

Demographers at the United Nations Population Division (UNPD) and the U.S. Census Bureau calculate that Chinese fertility levels today are far below the level necessary for population replacement. By their reckonings, current childbearing patterns, if continued, would mean each successive generation would shrink by 25% (UNPD) or 27% (Census Bureau). Official Chinese estimates, and the work of some independent Chinese demographers, suggest an even steeper drop.

These fertility estimates are nationwide averages. In China’s cities, birthrates are far lower. In Beijing and Shanghai, for instance, official estimates suggest that women are having far fewer than one birth per lifetime (around 0.7 on average). In such settings, scrapping the One Child Policy will make no demographic difference whatsoever: People aren’t even using their given birth-quota permits now.

Yet even in rural areas the desire for children may now be more attenuated than is commonly supposed. A major study conducted in 2007-10 by Chinese and American demographers found that the eastern province of Jiangsu only a third of rural families would favor having a second child.

Perhaps this shouldn’t be so surprising. In Taiwan and Hong Kong—places that share the greater Chinese culture but have never implemented population-control policies—fertility rates have been fluctuating around one birth per woman for two decades. Levels are only slightly higher in South Korea and Japan.

These more developed East Asian economies have witnessed a “flight from marriage” by growing numbers of young women who choose to postpone or forgo their weddings. The trend now seems to be reaching mainland China, starting as it did elsewhere with the educated urban elite. It would be another factor lowering birthrates no matter what the Chinese government does.

So let us ask once again: Why, apart from its totalitarian impulse, does the Communist Party cling to its abhorrent and manifestly impractical One Child Policy? The most intriguing answer I’ve heard came from one of China’s leading demographers a few years ago. When I asked him this question (couched a bit more politely), he said he could only guess that the leadership in Beijing actually believes that Chinese women will start having five children again if they end the policy.

His guess may or may not be correct. But if his reading of China’s leaders is right, or even approximately correct, the Communist rulers in Beijing would be further out of touch with their subjects than almost anyone suspects.

Mr. Eberstadt is a resident scholar at the American Enterprise Institute and a visiting researcher at the Asan Institute in Seoul.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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