China should lift all birth restrictions to encourage families to have more babies as the population is aging faster than in developed countries, central bank researchers said on Wednesday.
More emphasis should be put on investment and savings, and the rapid decline in the savings rate must be halted to deal with the heavy burden of supporting an elderly population, a working paper published by the People’s Bank of China (PBOC) said.
“China must recognize that the demographic situation has changed,” PBOC researchers led by Chen Hao (陳浩) wrote in the paper.
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The country must “realize education and technological advancement will not be able to make up for the decline in population,” they added.
Faced with a rapidly aging population, the government began easing its stringent decades-old one-child policy in 2013, eventually changing its rules in 2016 to allow families to have as many as two children.
However, that has not helped to reverse the decline in the birthrate, which reached 10.48 births per 1,000 people in 2019, the lowest since the founding of the nation in 1949.
In the US, the rate was 11.4 in the same period.
The PBOC’s comments promoting fertility fueled a rally in baby and mother care-related stocks yesterday.
The researchers made a number of forecasts in their paper:
China’s labor force is expected to shrink at an annual rate of 0.5 percent from last year to 2025, resulting in a 15.2 percent decline in the workforce by 2050, from 2019.
The dependency ratio — or the number of dependents in a population divided by the number of working-age people — is projected to rise to 43.6 percent by 2050, from 17.8 percent in 2019.
The researchers said that China should not follow the low savings approach in developed economies, saying that “consumption was never a source of growth.”
The country’s gross domestic savings rate declined to 44 percent of GDP in 2019, from 51.1 percent in 2010, World Bank data showed.
China should expand investment in its midwest, as well as other developing countries, to take advantage of the labor there, the paper said.
The researchers called for more serious efforts to reduce challenges faced by women in pregnancy and childbirth, as well as a reform of the pension system.
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