One-child policy starts to cost China

25 January 2015 - 02:00 By Bloomberg
subscribe Just R20 for the first month. Support independent journalism by subscribing to our digital news package.
Subscribe now
SLOWER GROWTH: China's birth policies mean fewer young people to replenish an ageing workforce
SLOWER GROWTH: China's birth policies mean fewer young people to replenish an ageing workforce

China is paying the economic price for its 36-year-old one-child policy, with the third straight yearly decline in its labour force weighing on growth prospects.

The working-age population - those aged 16 to 59 - fell 3.71 million last year, the National Bureau of Statistics said this week, steeper than the decline of 2.44 million in 2013. The first drop was in 2012, when the group - then also including 15-year-olds - decreased by 3.45 million.

Like Japan's experience since the late 1990s, the downturn in China's working-age population is corresponding with a deceleration in economic growth. While the shrinking labour pool is helping to prevent a rise in joblessness, it is also driving up labour costs and eroding the manufacturing and export competitiveness that helped fuel China's 30-year expansion.

"It will clearly mean that, in the coming 10 years, labour will contribute less to growth than it has done in the past two decades," said Louis Kuijs, Royal Bank of Scotland Group's chief greater China economist in Hong Kong.

"Declining contribution from labour is one of the three key reasons why we see trend growth coming down," along with slower capital accumulation and less room to catch up with global best practices."

China's economy grew 7.4% in 2014, the least since 1990. Per-capita disposable incomes of urban residents rose 9% last year from 2013, while rural residents' incomes climbed 11.2%.

As workers become scarcer, they are also more demanding. Yue Yuen Industrial Holdings, which makes shoes for clients including adidas AG and Nike, saw operations hampered by protests over social security payments and salaries in April at its factory of about 45000 workers in Dongguan. The China operations of Wal-Mart Stores, IBM and PepsiCo were all affected by labour protests last year.

The ratio of jobs available versus job seekers rose to 1:15 in the fourth quarter, up from 1:1 three months earlier.

The urban unemployment rate was 5.08% in December.

There have been increasing calls to loosen family planning policies and some relaxations, but the government has maintained most of the controls first adopted in the late 1970s to curb population growth.

In 2013, couples where either parent is a single child were allowed to apply to have a second baby.

By last week there had been only one million applicants for a second child - in a country of 1.4 billion.

Yi Fuxian, author of A Big Country with an Empty Nest, said: "China is turning grey on an unprecedented scale ... and the government, even the whole Chinese society, isn't prepared for it."

subscribe Just R20 for the first month. Support independent journalism by subscribing to our digital news package.
Subscribe now