The Meaning of One Child Policy Reform

With news outlets rushing to describe how the One Child Policy will be reformed to allow anywhere from ten to twenty million Chinese families to have an additional child, it seems useful to look at the economic and social implications of the changes. As many have noted, any reform of the One Child Policy carries with it great symbolic weight, even though the One Child Policy is basically moot for many Chinese.

Why moot? Although often presented to Western audiences as an iron fisted law – and it is indeed sometimes enforced in a draconian manner by local authorities – the One Child Policy nonetheless features a number of exceptions. For instance, rural residents whose first child is female, all Chinese minorities, and couples who were both born in single-child households are all eligible to have two children. Even in cases where having a second child is illegal, the enforcement of the law is influenced by China’s crypto-federalist structure, with punishment ranging from minor fines, to the loss of one’s job, to forced abortion and sterilization. Generally speaking, the better-governed a Chinese city, the more lenient authorities are in enforcing the One Child Policy.

While Chinese in the countryside often have more than one child, urban Chinese entitled to having two children rarely exercise that right. There are a number of reasons for this. For starters, while having two children might be legal for a couple, there remains a strong social taboo against having additional children. More often, children represent an undue financial burden for Chinese faced with First World childcare expenses on an emerging economy budget. Along these lines, the tax contributions of Chinese citizens are largely based on VAT and payroll taxes, and the tax system provides little in the way of incentives for couples to have children. Still other couples see a second child – or any children – as an obstacle to career development and even leisure time, which reflects attitudes throughout much of urban Asia. For instance, in Taiwan, which is not controlled by the government in Beijing and thus has no One Child Policy, the birthrate was just 1.265 in 2012.

China’s megacities – Beijing, Shanghai, and Guangzhou – would nonetheless like couples to have more children to grow their tax base and help pay for the costs of a graying population. Over the next generation, the average age of Chinese will grow considerably, and large cities – where life expectancy is the longest – will be even older than the national average. In 2009, Shanghai began a campaign to get eligible couples to have two children, but the public reaction was mixed. While in other countries a similar population deficit in large cities would be corrected through internal migration, China’s household registration system, the hukou, limits the ability of countryside people to become residents of megacities.

Arguably, One Child Policy reform and hukou reform are interlinked. Megacities and first- and second-tier cities have resisted hukou reform because of a longstanding fear of the creation of slums and possible threats to social order. Moreover, internal remittances from the China’s East Coast to the countryside have played an important role in rural development, increasing nonfarm income and allowing for increased economic specialization. Nonetheless, many rural Chinese would like to become residents of larger cities, citing improved access to education and social insurance as the main incentives for changing residency.

In recent years, the government’s response to the demand for urban hukou (urban residency) has been to urbanize the countryside. Shenzhen, a city literally built from the ground up in the last thirty years, is the best-known example, but China abounds with new edge cities and townships which have appeared almost overnight. The government’s recently announced plans for hukou reform are also focused on these current and future lower-tier cities, with the promise of turning rural Chinese into city-dwellers – though not into residents of Shanghai and Beijing. These fast-growing cities will be subject to the same tax pressures as their larger brethren, however, which leads to the question of how they can grow and maintain a local tax base if new residents are limited to only one child. Moreover, without better schools and social insurance in their own cities, newly-urban Chinese will still find migration to megacities attractive, which is a lose-lose scenario from the point of view of Chinese urban planners.

Enter the new One Child Policy reforms. Megacities will benefit from a population bump as the taboos against having two children are diminished. Smaller cities and cities planned for the future will benefit as populations grow and their tax base expands. China on the whole will benefit from the perception that the country is serious about changing one of its most controversial policies. What remains to be seen is how thorough the implementation of the reform will be at the local level. There are many vested interests that have turned the One Child Policy into a moneymaking tool and have used the policy in oppressive ways that Beijing itself has declared illegal. In these dark corners, like human rights activist Chen Guangcheng’s hometown of Linyi, the old, bad One Child Policy is unlikely to go quietly.

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