No post one child policy baby boom in China

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Cross-posted from Investing in Chinese Stocks.

Last year when the change in the one child policy was announced, I wrote:

China is going to allow couples with one only child spouse to have two children. Currently, only couples in which both are only children can have two children. However, this law is only strictly enforced in the cities. So the number of people affected is quite small. Bank of America estimates an incremental increase of 9.5 million babies, total.

Consider the bigger picture. China is urbanizing and one plan for keeping growth from collapsing to near 0-3% is to push more people into cities. The fertility rates in the cities is already low by choice. China increasingly looks like Hong Kong, Taiwan and Singapore, where the fertility rates are 1.1, 1.1 and 0.8 children born/woman, respectively. China’s fertility rate is currently about 1.6 children born/woman.

If they want to raise fertility, they should deurbanize. China’s fertility rate is headed lower, one child policy or not.

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From Caixin today, Hard Choices for Family Planners and Parents:

So when the National People’s Congress last December liberalized the policy – thus giving most of the country’s families permission to have up to two children for the first time in 35 years – it seemed the hearts of the technocrats were finally softening. And it was widely assumed that many parents previously restricted to one child would jump at the chance to have a second.
But now, as the adjustments take full effect and the nation’s “dandu” – the Mandarin word meaning “family in which either parent is an only child” – exercise their newly acquired freedom of choice, unexpected challenges to the government’s family-control policies are starting to emerge.

For example, parents in many parts of the country did not react to the policy change by bearing more children, at least not immediately. Parents in Zhejiang Province, for example, filed only 27,549 applications for a second child between mid-January when the local government adjusted the birth control policy and March 31 – far below expectations. Experts had predicted the liberalization would increase province-wide births to about 800,000 annually, yielding a rate of 1.8 births per 1,000 people in Zhejiang compared to the 2010 birth rate of 1.02.

Some of the problems are due to bureaucracy:

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One couple in the Zhejiang city of Taizhou had their second child December 28 – the same day congress approved the changes. But because the provincial government didn’t enact a local version of the policy adjustment until January 17, the couple was fined 200,000 yuan.

And check out this fertility rate in the northeast:

What’s happened so far has “thrown cold water” on these and other expert conclusions, said Wisconsin’s Yi, who has studied recent data from across the country. All local family planning authorities continue to control the pace of allowance of second children by dandu families through an application and approval process. They are also mounting propaganda campaigns to dissuade couples of child-bearing age to avoid a baby boom.

As in Zhejiang, lower-than-expected birth rates so far this year in Sichuan have proven forecasters wrong. Some experts predicted Sichuan would see the rate rise to 1.43 from 1.33 after the one-child policy was relaxed. But that hasn’t happened – at least not yet – because officials have approved in the policy’s first month only 5,530 second-child requests from among some 28,464 parent-applicants.
The average birth rate for three northeastern provinces – Liaoning, Jilin and Heilongjiang – has yet to rise from its low level of 0.75.

I had no idea it was that low, that is even lower than Singapore.

The negative conclusions by social scientists are as wrong as their optimistic estimates:

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Several academics said that, from a demographic perspective, the years between 2005 and 2010 would have been an ideal period to adjust birth policies and thus the population. Now, they say, that window of opportunity is closing.

Li Jianmin, a professor of population policy at Nankai University’s Population and Development Institute, says soon there will be no time left for significant reforms. “Once the window period has passed, it will be very difficult to reform later,” he said.

Fertility rates can reverse rapidly; it only takes 9 months. There are deeply rooted cultural and ideological factor at work of course, but the change can still occur rapidly. The intractable issue is that once you have a smaller child bearing population, an increase in fertility leads to an increase in dependents. The population pyramid turns into an hour glass.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.