Trendspotting: China Pins Its Future on a Three-Child Policy

NewsWire: 6/03/21

• China has announced that all married couples will be allowed to have three children. This ups the two-child limit set in 2016, which failed to reverse the country’s ongoing birth declines. (The New York Times)
• NH: This is big news. And yet it’s unlikely that much, if anything, will change.
• The new three-child policy is the CCP’s strongest acknowledgment yet that its strict birth control policies have been driving the country toward a demographic crisis. But will the new policy work? After China increased the limit from one to two children in 2016, births saw a brief uptick before dropping for the next four years straight. (See “China's One-Child Policy is Over but Chinese Fertility Rates Still Low.”) If families are already reluctant to have two children, there’s even less enthusiasm to have three.
• The party also indicated in its announcement that it will offer help with some of the major obstacles facing young people who want to raise children, such as education, child care, and housing costs. It also promised to strengthen workplace protections for pregnant women. But these pledges were short on specifics. So long as any limit on children remains in force, so (presumably) does the National Health and Family Planning bureaucracy that enforces the limit, which makes young people skeptical that the state's habit of monitoring family behavior will change anytime soon.
• Among the public, the new policy was met with widespread indignation. One Weibo user commented: “Whether you change the policy to five children or eight children, housing prices are still the best sterilization tool.” Another was more direct: “Get out of here!” Some aspiring careerists feared the rule change would worsen their job prospects by making employers think that they would go on maternity leave after getting hired.
• The fundamental challenge for policy planners is that today's rising generation of Chinese no longer aspire to have as many children as their parents did. The state-run news agency, Xinhua, released data from the National Health Commission showing that Chinese people born after 1990 want to have 1.66 children on average, down 10% from those born after 1980.
• What's more, over the last decade, the decline in fertility has overwhelmingly been driven by a rising share of women choosing to have no children at all--not by women who have one or two children choosing not to have another. (See "China's Population: A Mystery Wrapped in a Riddle: Part 2.") Hard to see how the new rule is going to reverse that trend.
• To be sure, the news was received warmly among the parents who no longer have to fear being fined or punished for having three children. And after the announcement, the stocks of Chinese diaper companies, toy makers, and baby food producers soared. But clearly these enthusiasts aren’t demographers. Until the PRC follows its new rule with generous economic and social incentives, investors would be wise to sell this mini-rally short.