Why China’s declining population growth may be good news

Evidence suggests that in all prosperous countries where women are well educated and free to choose whether to have children, fertility rates fall significantly. This should be seen as a positive development
When populations no longer grow, there are fewer workers per retiree, but also a reduced need for infrastructure and housing investment

Published: 8:45am, 12 Jun 2021

China’s recently published census brought warnings of severe problems for the country. “Such numbers make grim reading for the party,” reported The Economist. This “could have a disastrous impact on the country,” Huang Wenzheng, a fellow at the Center for China and Globalization in Beijing, told the Financial Times.

But a comment posted on the microblogging platform Weibo was more insightful: “The declining fertility rate actually reflects the progress in the thinking of Chinese people – women are no longer a fertility tool.”

China’s fertility rate of 1.3 children per woman in 2020 is well below replacement level, but so, too, are fertility rates in every rich country. Australia’s rate is 1.66, the US’ rate is 1.64, and in Canada it is 1.47. In all developed economies, fertility rates fell below replacement in the 1970s or 1980s and have stayed there ever since.

Only in poorer countries, concentrated in Africa and the Middle East, are much higher birth rates still observed. In India, all the more prosperous states – such as Maharashtra and Karnataka – have fertility rates below the replacement level, with only the poorer states of Bihar and Uttar Pradesh still well above.

And while the national rate in 2018 was still 2.2, the Indian National Family Health Survey finds that Indian women would like to have, on average, 1.8 children.

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Half a century of evidence suggests that in all prosperous countries where women are well educated and free to choose whether and when to have children, fertility rates fall significantly below replacement levels. If those conditions spread across the world, the global population will eventually decline.

A pervasive conventional bias assumes that population decline must be a bad thing. But while absolute economic growth is bound to fall as populations stabilise and then decline, it is income per capita which matters for prosperity and economic opportunity. And if educated women are unwilling to produce babies to make economic nationalists feel good, that is a highly desirable development.

Meanwhile, arguments that stable or falling populations threaten per capita growth are hugely overstated and, in some cases, plain wrong.

True, when populations no longer grow, there are fewer workers per retiree, and health care costs rise as a percentage of GDP. But that is offset by the reduced need for infrastructure and housing investment to support a growing population.

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Meanwhile, a stable and eventually falling global population would make it easier to cut greenhouse-gas emissions and alleviate the pressure on biodiversity and fragile ecosystems. And contracting workforces create stronger incentives for businesses to automate, while driving up real wages, which is what really matters to ordinary citizens. In a world where technology enables us to automate ever more jobs, the far bigger problem is too many potential workers, not too few.

True, fertility rates far below replacement level create significant challenges, and China may well be heading in that direction. Many people expected that after the one-child policy was abolished in 2015, China’s fertility rate might increase.

But a look at the freely chosen birth rates of ethnic Chinese living in successful economies such as Taiwan (1.07) and Singapore (1.1) always made that doubtful. Other East Asian countries such as Japan (1.38) and South Korea (1.09) have similarly low fertility.

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At those rates, population decline will be precipitate rather than gradual. If South Korea’s birth rate does not rise, its population could fall from 51 million today to 27 million by 2100, and the ratio of retirees to workers will reach levels that no amount of automation can offset.

Moreover, some surveys suggest that many families in low-fertility countries would like to have more children but are discouraged by high property prices, inaccessible childcare and other obstacles to combining work and family life. Policymakers should therefore seek to make it as easy as possible for couples to have the number of children they ideally want.

But the likely result will be average fertility rates well below replacement level in all developed countries and, over time, gradually falling populations. The sooner that is true worldwide, the better for everyone.

Adair Turner, chair of the Energy Transitions Commission, was chair of the UK Financial Services Authority from 2008 to 2013. He is the author of many books, including Between Debt and the Devil. Copyright: Project-Syndicate