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    China’s Policy Reversal To Two-Children: A little too late?

    By

    November 11, 2015

    After nearly 35 years of the most radical experiments in the field of social engineering, the woes of China seem nowhere close to dissipation. Only if they had learnt from India *phew*! As China reverts to the two-child policy, experts claim that this move may have come in a little too late for the third largest country in the world.

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    China fast approaches it demographic doomsday and has fallen fast and quick from the crown it had held as the fastest growing economy (now held by India). Registering its slowest growth since the financial crisis, China has marked a deceleration from 7%in the first quarter of the year (Made In China, no more? Eh?).

    Since implementation in 1979 to boost economic growth of the country, China’s one child policy has not only led to gender imbalance because of preference of males over females but also has skewed the age demographics. Almost 400 million people reduction has been marked in the concerned time period.

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    The reversal is being seen as a step to mitigate the social imbalances that will be reverberating in the country for years to come. “The abolition of the one-child policy is unlikely to have a big near term impact on the economy,” said Chang Liu of Capital Economics. “This move is targeted at longer term demographic shifts in China.”

    It will be years before the children born as a result of the policy change are big enough to join the labour force. With a projected 60% rise in old age population reported by 2020, it will cause an almost 35% decline in working age group. That said, nearly 50% of the Chinese population want no more than one child.

    GDP growth depends on three factors: labour, capital and total factor productivity. The one child policy has directly impacted two components required to sustain GDP growth. It has not only led to a decline in the labour force supply but has also reduced total factor productivity.

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    Economic consequences aside, the policy has created conditions in the region promoting human trafficking, human smuggling to compensate for the lack of women in the country and also illegal adoption market. The steps which were implemented to enforce the one-child rule were also in direct violation of the human rights including forced sterilizations and abortions.

    Now that the families are permitted to have two children, many families may choose not do so because having more children means more expenses. Also, given the one child rule, the women in the country chose to have careers and staying at home to raise multiple kids would be one step back.

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    Though aiming for consumption and investment boost, the country may have to wait years before the impact of the reversal hits them while it faces a showdown with India, in terms of economic growth and population. Meanwhile, their ghost towns are ready to be haunted yet again!

    Views presented in the article are those of the author and not of ED.

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