Year: 2017

In 1979, China began what remains the largest demographic experiment in history. The country’s controversial one-child policy was introduced in a bid to slow the explosive birth rate of the world’s most populous country.

Fast-forward to the present, and it’s clear the policy has worked. Ironically, though, it has worked a little too well. China is now struggling with a shrinking labour force, which could spell economic disaster for the global heavyweight.

For decades, Chinese couples were under strict instructions from the government to have just one child – bear more, and the result was a withdrawal of welfare benefits, fiscal penalties or, more drastically, forced abortions, sterilisation, or even abduction by the state.

The result was a drastic reduction in the size of the Generation X and Millennial cohorts that should be providing the workforce of the future, leaving China with a severe labour shortage.

Over the past few years, this problem has come to light, resulting in a softening of the rule. In 2013, the Chinese Government announced that couples would be allowed to have two children if one parent was an only child, sparking a slight rise in the number of new births (see Fig 1).

Then, in 2016, the rule was eradicated entirely in a bid to prompt a birth rate of 20 million. Although 17.86 million births were logged, making 2016 the most fertile year on record since 2000, the rate still fell short of the target replacement level.

Too much nothing
China’s modern economic expansion has been both swift and spectacular. Alongside an astonishing average GDP growth rate of more than nine percent for three decades, the country has also witnessed aggressive industrialisation and urbanisation.

The resultant increase in both the supply and demand of urban jobs has caused a significant shift within the country’s vast population, with a large segment moving into the middle-class demographic. This change has seen the proportion of individuals – particularly women – with demanding careers increase significantly.

“China’s birth rate has been very low in recent years – around 12 per 1,000,” said Ren Yuan, Professor of Demography and Urban Studies at Fudan University. Though China’s one-child policy is the obvious culprit for this low birth rate, its impact has not been as significant as one might assume.

“The one-child policy, together with some earlier initiatives, has impacted China’s fertility, but actually, the one-child policy’s influence on falling fertility has been declining since the 1990s, and socioeconomic factors are having more and more of an impact,” Ren explained. “I believe that the one-child policy has actually had little impact on the macro level of fertility in China. Rather, the low birth rate is an indicator of low fertility in China, which is caused by social and economic factors, including improved employment opportunities for women, and people spending longer in education.”

With more and more couples leaving it late to have children, China’s fertility rate is falling sharply

With more and more couples leaving it later to have children, China’s fertility rate is falling sharply. According to the China Population Association, more than 40 million citizens were infertile in 2013, comprising 12.5 percent of those of childbearing age within the total population.

The factors referred to by Ren are linked to China’s economic development and subsequent urbanisation. With economic growth comes a greater incidence of smoking, alcohol consumption, unhealthy diets and rising stress among the population – all of which have a direct impact on fertility, both for men and women.

Pollution has also had a role to play in Chinese men’s plunging sperm counts, which have fallen continuously since the 1970s. According to the report The Effect of Urbanisation on China’s Fertility, published by the Population Research and Policy Review in 2012, urbanisation was responsible for around 22 percent of the decrease in China’s total fertility between 1982 and 2008, and was especially instrumental from 2001 onwards.

Fertile market
As a result of this trend, China’s IVF industry is booming. According to BIS Research, the market was worth $670m in 2016; by just 2022, it is expected to swell to $1.5bn.

While China’s rapid market expansion has resulted in reduced fertility, greater wealth has enabled more couples to afford the considerable sum needed for the treatment, which starts at around CNY 30,000 ($4,600) in poorer provinces.

Together with many hopeful parents seeking to conceive their first child, there has also been a surge in couples trying to have their second. “As well as a strong cultural impetus to continue family bloodlines, increasing demand is due to the recent relaxation of the one-child policy, the increasing number of late marriages, and women choosing to freeze their eggs,” said Dr Mark Surrey, Medical Director of the Southern California Reproductive Centre (SCRC).

As a result of this demand, state-run hospitals across China are struggling – waiting rooms are packed to the brim, while waiting lists are continually expanding. According to data from China’s Health Ministry, each state-run IVF clinic serves some 3.8 million patients – significantly more than the average 700,000 per clinic in the US.

This has led to the unfortunate rise of unregulated clinics, which are commonly advertised online, particularly through social media platforms. These clinics have become adept at eluding overburdened government watchdogs, with recent crackdowns largely unsuccessful.

In July, China’s Ministry of Health admitted that “routine oversight has been lax, and strikes against illegal behaviour have fallen short”. With private clinics also oversubscribed, demand for partnerships with foreign companies is now surging. That said, few have entered the market so far, due to stringent regulations that make it difficult for foreign entities to obtain a local licence.

In light of this situation, a growing number of couples are seeking treatment outside of China, travelling to countries including Thailand, Australia and the US in the hope of realising their dreams of parenthood.

Fertility clinics abroad are swiftly responding to this rising demand, employing Chinese-speaking medical professionals to liaise with patients, while also having their websites translated into Mandarin to help lure customers.

The average price of treatment is around $15,000, but it’s a sign of China’s exponential growth in recent decades that many middle-class couples are now willing to pay such a sum.

In addition to the comparative ease of getting seen in foreign clinics, part of the attraction is the option to learn the child’s gender – something that is strictly prohibited in China – as well as a generally higher standard of technology.

“Many Chinese patients come to SCRC to take advantage of the newest advancements in reproductive medicine, including genetic testing. This is hugely beneficial to women with genetic health concerns, or those who have had miscarriages,” explained Surrey.

Add to this the ability for single women to freeze their embryos, which China still does not allow, and it’s easy to see the appeal of this type of medical tourism.

Wider implications
A report published by China’s National Development and Reform Commission in January 2017 indicated just how severe China’s demographic problem could soon become. Experts predict that by 2030, a quarter of China’s vast populace will be aged over 60 – around 10 percent higher than the current level.

Consequently, the strain on the state will intensify as retirement funding and healthcare costs spiral. At the same time, the country is also seeing its labour force shrink, with a predicted 80 million fewer individuals aged between 15 and 59 by 2030.

“The best way to combat this demographic challenge is not actually through population policies such as encouraging people to have more babies,” explained Ren. “This method will usually fail to meet the objective, and will always produce some unintended outcomes. Instead, to combat the challenges of demographic change, social and economic institutional reforms are needed.”

Making matters worse, the problem may be self-exacerbating. As the cost of consumer goods rise, so will the cost of raising children, and so the likelihood of people having several children further diminishes.

According to a report entitled Urbanisation and Fertility Decline from the International Institute for Environment and Development, this effect is enhanced by the desire to achieve a better standard of living, which is a natural tendency born from a country’s economic development.

As such, parents’ desires to improve the health and wealth of their existing offspring will make them less likely to have more children, and more likely to encourage their children to focus on education and work during their most fertile years, further multiplying the problem.

The impact of government campaigns to encourage larger families will, therefore, be limited. What can make a difference, however, is improving the support systems in place for parents.

At present, China has low levels of parental leave – for men, it ranges between nothing and two weeks, while women typically get just four months. A lack of affordable childcare compounds the issue.

Comprehensive strategy
In hindsight, China’s one-child policy was a misjudged and overly extreme precaution. That said, despite its impact on the country’s fertility rate, there are several other factors at play. Eradicating the policy was a clear and positive step in combatting this demographic crisis, but it is by no means definitive.

A lot of work must be done to help drive China’s fertility rate above the necessary threshold. In the short term, this involves the development of the IVF industry, which means increasing the number of both state-run and private clinics to meet soaring demand. To help with this undeniably arduous task, easing restrictions on foreign entities entering the market would be hugely beneficial.

In hindsight, China’s one-child policy was a misjudged and overly extreme precaution

In the meantime, legalising more complex treatments and procedures will help more couples to conceive, particularly those who are unable to afford treatment abroad.

Similarly, making egg-freezing legal for single women – especially given the global trend for women to have children later in life as they devote more time to education and their careers – would also provide a boost. Finally, cracking down on unregulated clinics would improve patient safety and trust in the beleaguered system.

In the longer term, China can introduce policies that are beneficial for young families, such as better maternity and paternity leave, along with provisions for cheaper, more widely available childcare.

Such measures are crucial as China continues on its path of economic development, which will inevitably see the cost of living rise. The task is both great and complex, but its success is absolutely vital if China is to secure the future that it has set out for itself.