Taking on aging society's problems

But low fertility rate cannot keep the population structure at the optimum level forever. The change came in 2010, when the percentage of working-age population started dropping by 0.3 a year - there was a corresponding fall in the fresh supply of labor. If China's low birth rate continues, the working-age population will be less than 60 percent in 2040, while the population dependency ratio would rise to 62.4 in 2050.

Thus the adjustment in the family planning policy was necessary. For one, it can raise the general fertility rate, which lingers between 1.4 and 1.5, by 0.3. That would lead to 1-2 million more births every year and thus a larger workforce 20 years later. Relatively, the percentage of senior citizens would drop too.

But it would be naive to believe that the adjustment in the family planning policy would reverse the general trend of China's demographic change in the near future. Changes in demographic structures usually happen very slowly and the effects of a policy could take decades to become evident. According to UN Population Fund estimates, even if the total fertility rate of Chinese women of child-bearing age reaches 2 in 2020, the percentage of senior citizens above 65 years would still increase from 9.4 in 2010 to 27.2 in 2050 raising the population dependency ratio to 78.2.

With more children being born, the population dependency ratio may even rise in the short term, because the aging process of the population is not likely to be effectively curbed until 50 years after the policy is introduced.

Experiences of other countries show how long it takes for policies encouraging births to bear fruit, although reverse policies like family planning can curb population growth more efficiently in shorter time. The seeming dilemma has its own logic in social development. As we transform from an agricultural to industrial society, family-based production yields place to person-based production. As a result, the responsibility of caring for the elderly passes on, though gradually, from families to society making more couples reluctant to have children. For example, Japan and some Western European countries have for some time been encouraging their citizens to have more children but without much success.

In conclusion, adjusting the family planning policy alone cannot solve the problems created by an aging society, which poses the biggest challenge to China's economic growth. To tackle the problem, the government has to spend more resources on social security, old-age pension and medical care.

Apart from supporting its aging population, China also faces the tough challenge of rising labor costs. This is a serious problem given the abundance of labor-intensive industries in the country. Therefore, China has to accelerate sooner rather than later its industrial upgrade in order to occupy a better position in the global industrial chain.

The author is an assistant professor from the Institute of Population and Labor Economics, Chinese Academy of Social Sciences.

(China Daily 12/03/2013 page9)