Águeda Parra Pérez
Engineer, Sinologist, and Doctor in Political Science
The Asian giant’s ambitions to maintain economic growth that rivals that of the United States and India are in the hands of a new, more urban, individualistic generation with new consumer habits that does not seem very willing to create large families, thus condemning China to low birth rates.
China’s future is closely linked to the generation of digital natives, those born during the rise of technological titans such as Alibaba and Tencent and heirs to the economic and social model that has led the country to position itself as the second world power in recent decades. These young people born between 1980 and 2012, millennials and generation Z, constitute the most important group of digital consumers on the planet, the economic engine of an effervescent technological ecosystem that has transformed the Chinese economy and has made the Asian giant a global benchmark in sectors such as e-commerce and online payments. A modern and individualistic society by designation that has adopted the one-child policy as the best and only model for family planning.
Considered the main early-adopters of new technologies on a global scale, young Chinese are playing a leading role in the transformation of the country into an eminently urban society. Indeed, urbanism has been one of the main drivers of change in social transformation. During the nearly forty years of the one-child policy, China has gone from an urban population of just 18.6% in 1979 to 61.4% in 2020. This rapid transition has had an impact on household size, with single-person households proliferating and now accounting for 15% of households in China, a trend already seen in a third of households in Asia’s most advanced economies, according to McKinsey.
The timid response of society after the elimination of the one-child policy in 2015 calls into question the decision that the reform had not been undertaken earlier. After almost four decades, China has changed its family planning model three times in just 10 years, reflecting the response of a new generation of young people who are pursuing a different model of life than the one promulgated by the government. A reality that becomes more evident when looking at three key indicators and their impact on the demographic transformation towards an increasingly modern society.
The first of these is the fertility rate, which stands at 1.3 children per woman, according to the latest published census showing the evolution of society over the last decade. This is below the 2.1 children needed to guarantee generational replacement, and a long way from the 2.94 children per woman recorded in 1978. In line with this rate, the population has experienced the slowest growth rate since the 1950s with just 12 million births in 2020, bringing China’s current population to 1.412 billion people. While both indicators have been steadily declining, GDP per capita has followed a reverse trend. Exponential growth has meant an almost 45-fold increase in the income of Chinese society in just over four decades, rising from 183 dollars in 1978 to 10,000 dollars in 2020, with the Asian giant reaching the great challenge of being considered a middle-income country, according to the World Bank’s definition.
Faced with a greater availability of economic resources, digital natives are the first generation that has left behind the traditional habit of saving to become the main drivers of consumer spending. Among the population under 40, the acquisition of new electronic devices and leisure and entertainment activities are commonplace, and they are responsible for 70% of luxury purchases on Tmall, according to the consultancy firm Bain. As a result of these new habits, digital natives are taking out more consumer loans than any previous generation, with up to 50% being granted to those under 30, according to Nielsen. In turn, this high level of spending generates a situation of financial stress that means 30% of new loans taken out are used to pay off old debt.
Socially, women of the more digital generation are immersed in their own personal development and delay childbearing. The United Nations Gender Inequality Index ranks Chinese women’s labour force participation among the highest in the world, making it difficult for young Chinese women to follow the traditional values that the government seeks to encourage in order to boost the birth rate. With a rate of 60.5% in 2019, China is 8.6 percentage points higher than Spain’s female labour force participation rate, 5.2 percentage points higher than Germany’s, and 4.4 percentage points higher than the US, although China’s 85th place in this overall ranking falls far short of the positions held by major economies.
In a largely digitised society, social networks are the main barometer of opinion, and the responses to the survey launched by the official Xinhua news agency’s Twitter-like account on Weibo were overwhelmingly positive to the hashtag #AreYouReadyForTheThirdChild following the government’s announcement on 31 May. Just 6 per cent of the 31,000 participants were enthusiastic about the new policy before the poll was removed, with some 29,000 showing no interest in the family planning reform.
In addition to the lack of job protection for women, the high cost of raising a child is also among the main concerns of young couples. The average cost of raising a child up to the age of 15 for a family in Shanghai amounts to 840,000 yuan, about 110,000 euros, according to a report by the Shanghai Academy of Social Sciences, which is difficult to afford with a per capita income that stood at 27,450 yuan, about 3,600 euros, in 2020. For families with an income of less than 50,000 yuan, about 6,500 euros, the effort is even greater, with up to 70 per cent of their income being spent on raising a child.
The current pandemic situation has become an unexpected factor that has slowed China’s economic growth and does not favour a significant increase in the birth rate in the coming years. Faced with this possible reality, the option of eliminating all restrictions from 2025, just when the current Five-Year Plan comes to an end, seems to be gaining momentum.
Even so, the lack of enthusiasm of digital natives to start a family, even a single-member family, together with the reduction of the working-age population by more than 3 million people in a decade, severely threatens China’s industrial strategy. Other countries have suffered the same effect, such as Japan in the 1990s, ending its ambitions to overtake the United States.
If overpopulation was the main threat to the economic revolution that China initiated when it launched its reform and opening-up policy in 1978, failure to achieve the expected baby boom would jeopardise China’s dream of becoming a major world power capable of sustaining economic growth that would allow it to rival the US on a global scale, and India on a regional level. For China, a declining population would mean a failed attempt to become a superpower, hence the Asian giant’s determination to continue innovating and developing a digital economy strongly driven by new technologies to mitigate the effects of a low birth rate.
This article was originally published in esglobal
