It will take more than stamps to head off China’s demographic challenge

When China Post, the State-owned official postal service, unveiled a new collection of stamps to mark the upcoming Year of the Pig, tongues started wagging. Stamps themed to the Chinese zodiac are an annual ritual but this year they depicted a grown up pig couple alongside three little piglets – a sign to some that the government would seek to further relax long-term restrictions on family size.

That conclusion may sound farfetched but there is nevertheless a consensus among experts that China's current two-child policy is inadequate to deal with the demographic challenge posed by a rapidly aging population. While it did prompt a small increase in the number of newborn babies in 2016, the number dropped by 630,000 in 2017.

China's National Bureau of Statistics estimates the number of Chinese people over 60 years old has eclipsed 241 million, accounting for 17.3 percent of the total population. On current demographic trends, the ratio will increase to a staggering 34.9 percent. For many demographers, it is time to abandon this family planning policy entirely and allow people to decide how many children they want to have.

In the meantime, the government has proposed tax relief for couples with children in an effort to help families deal with child-raising costs. But so far, these incentives have done little to boost the fertility rate. To effectively address the issue, the government will focus on multi-dimensional factors underlining the sustained declining desire to have children, which are not only economic, but also cultural and political.

Decades of the one-child policy have transformed China's traditional culture, which once favored multiple children, into a new culture that sees children as a burden rather than a blessing. Those violating family planning laws were forced to pay a fine disguised as “compensation to society” for the social resources the children would use. Such a rationale has gradually changed the family unit, as childraising costs keep rising. Given that primary child-rearing responsibilities still fall disproportionately on to women in China, a lack of effective protection for working mothers means having more children is increasingly viewed as something that will impact a woman's career and threaten living standards.

Therefore, to fundamentally reverse the trend, the government needs to take a systematic approach to address the economic costs of raising children, which should include offering tax benefits to families, building and funding more nurseries and increasing subsidies for child-raising costs. Culturally, the Chinese government needs to start to nurture a culture that deems children valuable assets, rather than a social burden.

Most important, it is time for China to terminate its so-called “land finance” policy, which sees governments sell land to real estate developers for revenue. This has led to runaway housing prices in recent decades. Studies from developed countries like the US and UK show a strong correlation between high housing prices and a low birth rate. A study released by Zillow Research in June, for example, showed an extra 10 percentage-point rise in home values was associated with an extra 1.5 percentage-point drop in birth rates for 25-29-yearold women in the US. In China, home values have increased more than tenfold in the past decade.

Though the consequences of an aging population will still take some years to emerge, China needs to take action now while the economy remains robust. By the time demographic challenges start to take a toll on the economy and government revenue, it will be too late.

For many demographers, it is time to abandon this family planning policy entirely and allow people to decide how many children they want to have