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China’s One-Child policy: A Study of the Human Capital Investment and the Ageing Society; By Amrutha

Image Courtesy: ABC

Article 39/2019

Abstract:

The One-Child Policy has played a huge role in the economy of China. It had brought about some huge changes in China. After being followed rigidly for 35 years, it was not until the year 2015, that the Government decided to roll it back. This paper on the One Child Policy is divided into three parts. The first part will focus on the effects that China faced because of it, focusing on the Demographic Dividend. The second part of the article will focus on Human Capital Investment and its impact on society. The third portion will focus on the ageing society and the future of China. The conclusion will include a personal view of China and its future.

Questions :

  1. What are the effects of the One-Child policy?

  2. What impact did Human Capital Investment create in society?

  3. Given the increase in the old age population, What is going to be the future of China?

Introduction

The One-Child policy is a restrictive measure, that was implemented in China, in the year 1980.[i] It was an initiative through which, couples in China were encouraged, not to have more than one child. The Government of China introduced it to reduce overpopulation.[ii] The policy was introduced during Deng Xiaoping’s period. It encouraged its followers by giving benefits like

  1. Employment

  2. Health Care

  3. Housing ( Real Estate ).[iii]

The Government of China gave “ One Child Honorary Certificates” to the families who followed the policy.[iv] In the first phase of it’s implementation, around 6.1 million couples had recieved the honorary certificates in China.[v]

In the year 1980, the number of one child families had relatively increased. By 1990, it had increased to about 90 per cent of the population[vi]. People who did not follow the policy faced disadvantages like

  1. Unemployment &

  2. Fines[vii]

As far as the policy is concerned, it was strictly implemented in the Urban areas than in the rural.[viii] The people in rural areas could give birth to two or a maximum of upto four children (without the knowledge of the Government officials)[ix]. The Government of China gave this liberty to the villagers and townsmen and women, so that they will have enough number of people in the agricultural sector and in the military[x]. The children who were not registered under the Government, were known as “Black Children” (this is in the case of the rural children ).[xi]

The policy went on for about thirty five years. The policy was relaxed in the year 2013, giving the couples a choice to have a second child, if their first child was a girl or if the child was physically or mentally challenged. The policy ended in the year 2015.[xii]

Effects of China’s One-Child Policy

Though the One-Child Policy is officially done with, the people of China are, even to this day, facing its aftereffects. The policy had it’s own positives and negatives. On the one hand, it resulted in the reduction of birth rate ( primary goal ). It had also resulted in bringing about a structure in the Chinese family system. According to Feng’s study in the year 1992, there were about 80 per cent of the population following the 3 member family, in China.[xiii]

The One-Child Policy resulted in bringing about

  1. High Savings rate

  2. Sufficient supply of labour

  3. Rapid improvement in Human Capital

  4. Radical resource allocation through labor mobility.[xiv]

One the other, The One-Child Policy also had its defects, for instance, the reduction in the fertility rate is at an all time low now. There has been a decrease from 2.8 per cent to 1.7 per cent in fertility rates[xv]. Experts are predicting that China cannot face a ‘Baby Boom’ at this rate.[xvi] Because of the policy benefits, recieved by the family members, there has been an increase in the life expectancy which has resulted in an increase of the ageing elders by 44 per cent.[xvii]

The policy kept changing in accordance to the leadership, that further resulted many changes in the country.[xviii] At one point of time sterilization and abortions were encouraged in China with the applications of IUD’s.[xix] With the preferance of the male child ( Confucius thought – Sons bring prosperity to the family ), women preferred to have sex selective abortions, which resulted in an unhealthy mindset for the women.[xx] This has lead to a gender gap between the male and female ratio. Now, the country has a huge gender gap as the male population is more than the female.[xxi] The bride prices ( which the grooms family pays to the bride on their behalf ) has also increased.[xxii]

The women of China tend to face a pay cut once they are back from the maternity leave.[xxiii] Additionally, when the family looses thay One child, then the family is called as “One Child Lost Families”[xxiv]. Grandparents and parents face great pain on loosing that one child.

Demographic Dividend:

Demographic dividend is said to be a liability than an asset for the people of China. Economists define demographic dividend as ‘An economic potential resulting from shifts in population age structure in terms of working and non-working population’.[xxv] This can be easily understood using a formula

Ratio of the working population

____________________________________  = Demographic Dividend

Dependency of the non-working population

While, there has been an increase in migration, as the people of rural areas prefer moving to urban areas for employment.[xxvi] The rural urban migration has caused an increase from 1 per cent to 2.3 per cent in the GDP of the country as it had brought about an increase in the labour productivity ( that in turn increases the output per worker, decrease in the interest rate, and return of Capital )[xxvii]. This has resulted in an increase in the income of the worker.

Contrary to this, the emergence to Artificial Intelligence, which comes with a promise to diminish labour costs all together, has caused many of these migrants with common skills to be replaced by it.[xxviii] ( due to less quality of education -> no good jobs -> less labour productivity -> loss of jobs ).

Adding fuel to the fire, there has been a considerable amount of increase in the dependency ratio between the working and the non working population. The worker to elderly ratio is 16:100. It’s predicted that by 2050, it will increase by 64:100[xxix].

According to the Migrant Population Development Report ( released by China’s National Health Commission) –  there is a correlation between migration and Capital Accumulation ( Urban ).[xxx]

Human Capital Investment and the impacts of HCI

One of the major challenges faced by the people of China is Human Capital Investment. The major aim of investing in Human Capital is to develop employable skills among labourers. This has played a significant role along with the implementation of the One-Child Policy. When Deng Xiaoping introduced the policy, the country was at its take-off stage ( shifting from agriculture to industrial ).[xxxi] Many private firms were established during this period and a lot of people were encouraged to take up secondary jobs.[xxxii] By the year 1990, nearly 85 per cent of the people moved to industrial based jobs.[xxxiii] There has also been a reduction of the Agricultural labour from 71 per cent to 30 per cent and an increase in the industrial jobs from 18 – 30 per cent.[xxxiv]

When people started moving, there was an increase in the labour productivity which resulted in an increase in the income of the people. The standard of living among the people increased. When income increases, investment also increases.

In the case of China, Human Capital increased rapidly. It was a prominent feature is the child’s development. Human Capital Investment is the investment made by the parents to improve the child’s skill through education and other activities. According to OECD, Human Capital is the knowledge, skills, competencies and other attributes embodied in individual or group of individuals acquired during their life and used to produce goods, services or ideas in market circumstance.[xxxv]

Education has been playing a major and a significant role in China. Parents would invest in the child’s education to develop his/her intellect. Some parents, especially the mothers made sure that their child exceled in all the fields of study. Those mothers were known as ‘Tiger moms’[xxxvi], named in pursuit, and of thier zeal, to make thier child outstanding.

Investments were made by parents and grandparents as children were regarded as their ‘Spiritual Solace’.[xxxvii] They invested heavily because they believed in “Yang er Fang lao” which is nothing but with an expectation of reciprocation of care during their later years. But over-affection of Children had only lead to development of arrogance amongst these children. So much that the academicians who studied them called them ‘Little Emperor’ or ‘Spoiled brats’.

Judith Blake says that Human Capital lead to

  1. Intellectual Superority

  2. Achieve higher education

  3. Occupational Status.

In the case of twins, the human capital was split betweem both the children but is not effective as that which was done for the single child.

Some of the reasons why the elders did not receive the reciprocation was because of –

  1. Dementia: nearly 63% of the old age people in China had it and have it now.

  2. Migration: As people migrated, they were not be able to take care of the parents.

  3. Modernization: As the country was developing economically and socially, traditional values were and are not followed by the young population of China ( Filiel Piety is not given the importance ).[xxxviii]

Therefore the children tend to leave their parents in Old age homes or Nursing homes, rather than giving them the expected care.

The dependency ratio had increased and will increase as parents would depend on their children. Though nursing homes are viewed as better alternatives by most, the biggest drawback is noticed in the mindset of the caretakers, who believed piously in them recieveing back the care they gave. The love being unrequited, has been the cause of emotional turmoil.

The Government understandood the situation and introduced the ‘elderly law’. The elderly law in China continues to allow parents, to sue their children in case they are not taken care of. And severe measures are taken to deal with children who will not agree to meet up with them. Now, many companies too are encouraged to give paid holidays for their employees to visit thier parents. Aditionally, The government put a rule that children, especially daughters should visit their parents frequently[xxxix]. But they rather proxy through proxy websites that offer services to visit the parents on their behalf. The proxy services cost anywhere from 10 yuan to 5000 yuan.

Some parents feel that they should depend on the government more than their children. Hence the old age people have shifted their expectations towards the Government now.[xl]

The Ageing Society and the future of China

One-Child Policy has resulted in an increase in the number of dependents in China. Beijing and Shanghai are known as ‘Grey Province’ or ‘Grey Economies’ as the dependents in those areas are 1.7 million and 2.3 million in number respectively.[xli]

According to the Xinhua News the dependents have increased from 185 million to 221 million ( 2015 ).[xlii] It is predicted that by 2050, 85 per cent of the population will be more than 65 years of age. Yangzhou Huang says that “ In 2014, 9 per cent of the total population were more than 65, having enough

  1. Assets

  2. Housing

  3. Savings

  4. Investment[xliii]

But the money in other forms that lay a burden on the Government comes through

  1. Pension

  2. Health care insurance

These are the basic struggles faced by the Chinese Government.

The Government of China faces this struggle as most of their pension money comes from the taxes paid by the people. To make things worse taxes collection is reducing due to the shrinkage in emplyment. According to the reports put out by the Deutsche Bank, there will be a shortfall in pension worth trillions of dollars by 2050.[xliv]

Apart from pension, another thing that the aged population are looking forward from the goverment is Health Insurance. The insurance market is the biggest market in China. Especially, The health insurance market in China is significantly large. The Chinese Government has increased the safety net in the 12th Five year plan. Health care reforms is a major area of focus for the health insurancers.

Health coverage is also something that the depending population do not know about. Nevertheless, The Government and other companies are trying to educate people on such insurance policies in China. Consequently, the Government will also have to reform their

  1. Social Welfare System and

  2. Improve China’s Senior Care Capabilities[xlv]

The government is already giving $208 billion dollar health care stimulus to the old age people in China, now. Still nearly about 23 per cent of the people in China cannot take care of themselves and are dependent on the government. [xlvi]

People in China are using technology based products and they are spending their money on technology.

The one-child policy has brought about some major ramification to the economy of China some of them include

  1. Additional cost to the economy with regard to pension, medical and health care.[xlvii]

  2. It has destroyed traditional values like filiel piety.[xlviii]

  3. Shift in dependency towards the government.

  4. Non availability of health care of the ageing society leading to suicide.[xlix]

  5. Delay in marriages leading to a relunctancy of having children[l]

Conclusion

The one child policy has been both a blessing and a curse for the people of China. In terms of its blessing the One child policy has been beneficial as it brought about an increase in the life expectancy. In terms of its curse it has brougt about some of the major ramifications like destruction of filial piety, shift in the dependency, delay in marriages, increase in suicides among the ageing society etc. China has been trying to bring changes so that the economy does not have to face any issues. With an increase in the ageing society in China, Fredrick Neumann of HSBC says that “the country will become old before it becomes rich”, therefore the government is making sure that they are taken well care of.

References

[i] The effects of One Child policy

[ii] Ibid (1)

[iii] Watts, Jonathan, China’s one-child policy means benefit for parents – if they follow, october 25th, 2011, https://www.theguardian.com/environment/2011/oct/25/china-one-child-policy-means-benefits-rules

[iv]  Feng, Xiao-Tian, Poston jr, Dudley L, Wang, Xiao-Tao, “China’s One-Child Policy and the Changing Families.” Journal of Comparative Family Studies. https://www.jstor.org/stable/24339438

[v] Ibid (4)

[vi] Berenson, Tessa, “Here’s how China’s One-child policy was started in the first place”, october 29th 2015, https://time.com/china-one-child-policy-history

[vii] Ibid (6)

[viii] Flfleld, Anna, Beijing’s one-child policy is gone. But many Chinese are relunctant to have more, may 4th 2019, https://www.washingtonpost.com/world/asia_pacific/beijing-one-child-policy-is-gone-but-many-chinese-are-relunctant-to-have-more/2019/05/04/c722e568-604f-11e9-bf24-db9fb62aa2_story.html

[ix] Ibid (8)

[x] Ibid (8)

[xi] Rajan, S. Irudaya. “China’s One-Child Policy: Implication for Population Aging” Economic and Political Weekly, September (Sep. 17, 1994), 2502-2506

[xii] Ibid (1)

[xiii] Ibid(4)

[xiv] Fang, Cai. “China Must Transcend Its Declining Demographic Dividend.” Https://www.huewire.com/china-must-transcend-its-declining-demographic-dividend

[xv]  “Does China Have an Aging Problem?” Https://chinapower.csis.org/aging-problem/.

[xvi] Ibid (14)

[xvii] Ibid (14)

[xviii] Huang, Wei, “How does the One child policy impact the social and ecnomic outcome”, https://www.wol.iza.org/articles/how-does-one-child-policy-impact-social-and-economic-outcomes/long

[xix] “China offers Free IUD removal to cries of outrage”, February 28, 2017

[xx] Hesketh, therese, Xing, Zhu wei, “The consequence of son preferance and sex selective abortion in China and other asian countries,”

[xxi] Ibid (20)

[xxii] A distorted sex ratio is playing havoc with marriage in China, November 23, 2017,

[xxiii] Aneja, Atul, “The challenges to arrest the greying of China,” January 12, 2019,

[xxiv] Ibid (4)

[xxv] “China’s Demographic Dividend Still Exists:.”  January 21, 2019. Http://www.xinhuanet.com/english/2019-01/21/c_137762592.htm

[xxvi] “Is China’s Demographic Dividend Dwindling as Migrant Population Goes Home?” January 3, 2019. Http://www.chinabankingnews.com/2019/01/03/chinas-demographic-dividend-losing-steam-migrant-population-goes-home/

[xxvii] Ibid (26)

[xxviii] “Will AI take over our jobs?”, January 13,2019

[xxix]Shobert, Benjamin, “China will get old well before it gets rich”, October 10, 2013,

[xxx] Ibid (26)

[xxxi]Ibid (6)

[xxxii] Ibid (6)

[xxxiii] Ibid (4)

[xxxiv] Ibid (4)

[xxxv] “Human Capital Definition and Importance.” September 21, 2017. Https://www.economicshelp.org/blog/26076/economics/human-capital-definition-and-importance/.

[xxxvi] Keating, JOSHUA. “Does China Actually Have ‘Tiger Moms’?,” May 17, 2013. https://foreignpolicy.com/2013/05/17/does-china-actually-have-tiger-moms/

[xxxvii] Ibid (iv)

[xxxviii] Blake, Judith,. Family Size and the Quality of Children, November 1981, 421–42. https://www.jstor.org/stable/2060941

[xxxix] Hatton, Celia. “New China Law Says Children ‘Must Visit Parents’,” July 1, 2013. https://www.bbc.com/news/world-asia-china-23124345

[xl] Ibid (xv)

[xli] Ibid (vi)

[xlii] “China’s Senior Population May Surge from 2025.” Xinhua News, February 9, 2019. http://www.xinhuanet.com/english/2019-02/09/c_137808376.htm

[xliii] Ibid (xv)

[xlv] Ibid

[xlvii] Li, Olivia, “New reports on China’s ageing population illustration severity of economic problem” https://m.theepochtimes.com/new-reports-on-chinas-ageing-population-illustrates-severity-of-economic-problem-2788922.html

[xlviii] Ibid ([xlviii])

[xlix] Wei, Jianwen,  Zhang, Jie,  Guo,Ping, “Suicidal Ideation among Chinese elderly and its correlates: A comparison between rural and urban population” https://www.ncbi.nlm.nih.gov/pmcl/articles/PMC5876967[l] “China’s ageing population problem worsens: Birth-marriage rates fall”https://www.scmp.com/news/china/policies-politics/article/2155366/chinas-ageing-population-problem-worsens-birth-marriage-rate-falls

(Amrutha Prabhakar, Intern C3S,  is a Student of International relations. She pursued her bachelor’s degree in Economics at Stella Maris College. She is currently pursuing her Master’s degree in International Studies at Stella Maris College. Her interest lies in the socio-political aspects and has written on China’s One-Child policy and its impact on the ageing society.) 

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