China's New Demographic Plan
Since May 2023, China has been implementing a pilot project in over 20 cities with incentives for new marriages and policies to increase the country's birth rate. The Family Planning Association, a government body that studies measures to promote demographic development, has confirmed the introduction of the strategy in most of the national territory.
This policy complements the regional regulations that Chinese provinces are implementing to boost births, including tax incentives, housing subsidies, and free or subsidized education for families with new-borns.
With 1.4 billion people, China has increased its role in the global economy over the years thanks to its population size. However, the world's largest population distribution varies across different areas of the country, with the special regions of Hong Kong and Macau in the South having the highest population density, while Inner Mongolia in the North and Tibet in the Southwest have some of the lowest population densities. In 2022, for the first time in 60 years, China recorded a decrease in its population, with a contraction of 0.3 per cent, equivalent to about 850,000 individuals. This phenomenon coincided with the first year in which Beijing failed to reach the target of 5 per cent GDP growth.
China's birth rate, measured by the number of births per 1,000 people, dropped to 6.77 per cent in 2022, reaching its lowest level since 1978. The working-age population, between 16 and 59 years old, decreased from 70 per cent to 60 per cent in the last ten years. In addition to this, there is a gender imbalance, with about 30 million more men than women, and a greater disparity in rural areas, which has had an impact on the creation of families, that has been declining in recent years.
In this context of reversing growth trends, according to estimates by the United Nations, India surpassed China in the first months of 2023, becoming the most populous country in the world. This overtaking happened for the first time since 1950 when the UN started keeping records and estimating the global population.
This population decline could have repercussions for Beijing in numerous aspects; it could lead to a reduction in tax revenue and put significant pressure on pension and healthcare systems. The current trend is the result of the strict one-child policy implemented in China between 1980 and 2015 of the urbanization in the coastal region, and of the country's economic slowdown.
In 2015, the one-child policy was abandoned, allowing couples to have two children if at least one of the parents was an only child. In 2021, the three-child policy was introduced, which encourages the birth of three or more children and is accompanied by subsidies and benefits. The most recent legislation includes tax deductions, childcare services, the coverage of education costs, and the introduction of comprehensive labour protection tools for maternity.
The pilot program in Chinese cities follows President Xi Jinping's statements, which prioritize increasing the birth rate. The aging and decline in the working-age population have an impact on economic growth, leading to a decrease in the workforce and in the number of specialized professionals in many sectors.
Furthermore, changes in consumption patterns should be considered, with an elderly population segment tending to spend less, and the demographic decline inevitably causing a reduction in the size of the domestic market.
The changing dynamics of the Chinese system make it necessary for Beijing to implement strategies and supportive policies aimed at increasing the birth rate, attracting skilled workers, promoting innovation, and adapting to changing consumption patterns. Investments in the healthcare, the social welfare, and the education sectors will be crucial to ensure the future development of China's demographics and economy.