The Daunting Cost of Raising Kids in China. NewsWire

NewsWire: 3/11/22

• The cost of raising a child in China is nearly 7x its per-capita GDP. This is much higher than the multiple in most of the other 12 countries studied, which included the U.S. and Japan. (Reuters)
  
• NH: The average cost of raising a child to age 18 in China in 2019 was 485,000 yuan, or $76,629. That’s 6.9x the country’s per capita GDP. This is according to a new report from the Beijing-based YuWa Population Research Institute.
• In rural areas, the total cost averaged 300,000 yuan. In urban areas, it ran as high as 630,000 yuan. Costs were highest of all in Beijing and Shanghai, which clocked in at an eye-popping 969,000 yuan and 1,026,000 yuan, respectively.
• When compared to other high-income countries, the multiple in China ranked near the top. In Australia, the cost of raising a child relative to GDP per capita is 2.08x, in France, 2.24x; in Sweden, 2.91x; in Germany, 3.64x; in the US, 4.11x, and in Japan, 4.26x. Roughly speaking, aside from the US, these multiples correlate inversely with the fertility rate in these countries. The only country that surpassed China was South Korea at 7.79x. Perhaps it is no accident that South Korea, with the highest multiple, has the lowest birthrate in the world (see “South Korea’s TFR Drops Again”).
• In part, larger multiples reflect rising costs in these countries that have outpaced earnings. But they also reflect how much parents are expected or are willing to spend on different things.
• In their total cost estimates, the researchers included costs related to pregnancy, childbirth, parenting, and education. In China, education costs--including tuition, childcare fees, textbooks, educational software, and tutoring fees--accounted for the biggest share of the total. An earlier survey found that among urban families with children in primary or secondary school, spending on education accounted for 76% (yes, 76%!) of their total spending on children.
• These numbers help explain why China’s leadership was so eager to ban for-profit tutoring companies this summer. (See “China Goes All In on ‘Common Prosperity.’”) But the move was met with widespread dismay, since education is still seen as the only path to upward mobility. Parents argue that instead of evening the playing field, this will just lead the wealthy to hire private tutors. 
• So what is the ideal solution? China could mount, say, a massive spending program that offers education subsidies to all students. But there's little chance of changing the high-pressure culture surrounding education. And while reducing the cost of education would, at least in theory, go a long way towards helping young people afford to have children, it's far from the only reason why China’s birthrate has been declining.