China Is About To Take A Big Step Towards Solving A Major Demographic Problem

China is on the brink of taking a big step toward solving its labour shortage problem with one swift law change, according to a report from Citi.

Their report cites a news item from the Chinese newspaper Liaowan Weekly, which suggests the country’s one-child policy will be progressively brought to an end.

From Citi (emphasis ours):

China will relax the one-child policy in five provinces this year and probably switch to the two-child policy within five years. According to the Chinese Liaowan Weekly, under the new policy, all couples with a one-child family can have two children. Current policy only allows two kids for couples who are both from the one-child families. The policy relaxation will first be conducted on a pilot base in selected provinces… Wang Yuqing, Deputy Director of the Committee of the Population, Resources and Environment, CPPCC, admitted that China will likely switch to the two-child policy in the later period of the 12th Five Year Plan.

The lagging effects of the one-child policy are still a threat to the Chinese economy, because it will take time for the population to grow to re-balance in favour of those who are working age, over those retired or just born. And there’s no guarantee the removal of this law will create a baby boom, as costs inhibit families from having more than one child.

But there’s some reason to suspect there will be demographic improvement, as a result of increasing births and China’s increase in the retirement age. 

This chart of the dependency ratio indicates how things could improve.

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[credit provider=”Citi”]