BofA writes that:
China likely saw a baby bust in 2020…
• China saw a notable decline in the number of newborns in 2020. The pandemic will likely have a lasting impact on birth rate, combined with negative structural factors.
• Policymakers should abolish the family planning policy and introduce more incentives for new births during the 14th FYP.
The number of newborn babies in China likely plummeted in 2020, raising renewed concerns about its long-standing demographic challenge. A total of 10mn newborns were registered with the government in the year, a 15% decline from 11.8mn in 2019, according to data published recently by the Ministry of Public Security. A few cities also reported declines ranging 12%–23% in their new birth figures last year. While the aggregate actual number of births is not yet available (to be released by the NBS in April), all existing evidence points to a notable decline in nation wide birth rate in 2020.
Baby boom unlikely even after the pandemic
Will we see a rebound or even a baby boom soon, as the COVID threat has largely abated in China? We doubt it. It is true some couples might resume their delayed plans to have children. This has happened before—Beijing, Guangzhou and Hong Kong, the three cities hit hard by the SARS epidemic in 2003, saw birth rates drop but soon rebound.
However, the COVID-19 pandemic this time will probably have a more lasting impact on China’s demographics. We see three factors that may continue to drag the number of new births in 2021 or even beyond:
1.While the 2020 birth statistics have captured the shocks on women’s willingness to conceive in 1Q20, the impact from 2Q20 will be reflected in the 2021 birth figure;
2.The number of registered marriages declined sharply by 12.2% yoy in 2020, likely due to both social distancing and economic reasons;
3.While future income sentiment and employment expectation has improved gradually since 2Q20, it is yet to return to pre-COVID levels.
Structural factors could continue to drive down birth rate.
Besides the unexpected shock from COVID, China’s birth figure had already been trending down before the pandemic. The birth rate, which measures the number of new births per 1,000 population, fell to 10.5‰ in 2019 from 13‰ in 2016. This is not uncommon in modern economies, where women tend to have fewer children as economies develop, but it was certainly exacerbated by the one-child policy in China.
Despite the partial relaxation in 2016 for urban residents to have two children per couple, the birth rate in China will likely continue to be suppressed by some key factors:
1.Women’s pursuit of higher education and career leads to delay in the timeline formarriage and having children;
2.Rising cost of raising children, especially in terms of education and housing;
3.A stronger preference for quality vs. quantity of children, per Gary Becker’s theory of fertility choice (1960). Now a larger share of new parents are from single-child families themselves and prefer small family sizes.
Prompt policy response much needed than over China’s aging population has long been cited as a major challenge for its long-term economic growth, with its working-age population already peaking out in the mid-2010s.
In our earlier report, we have argued that population aging will slow but not derail the growth trajectory of the Chinese economy, if China can (1) adopt more labor-saving technologies, (2) upgrade human capital, and (3) expand its labor force by raising the official retirement age and encouraging higher female labor participation. That said, China will still have to roll out remedy measures to slow the population decline. Given both the cyclical shock to and structural downtrend in population growth, policymakers should take immediate actions to abolish the family planning policy during the 14th Five-Year Plan (2021–25). Otherwise, China could face another steep drop in new births around 2050, when the 2020s cohort of babies enter childbearing age.
