THE DRAGON HAS NO TEETH:

China's efforts to boost its fertility rate face three major challenges. First, the one-child policy has reshaped the Chinese economy, dramatically increasing the cost of raising children. China's household disposable income is equivalent to only 44% of its GDP, compared to 72% in the United States and 65% in the United Kingdom. The Chinese housing market was valued at four times the country's GDP in 2020, whereas the American real-estate market is valued at 1.6 times GDP.

Chinese policymakers now face a dilemma: if the real-estate bubble does not burst, young couples will be unable to afford to raise two children. But if the bubble does burst, China's economy will slow, and a global financial crisis will erupt. Likewise, raising household disposable income to 60-70% of GDP in order to increase fertility could reduce the government's power, undermining the economic foundations of its current "authoritarian at home and aggressive abroad" policy approach.

Given these difficult tradeoffs, Chinese policymakers might be more inclined to replicate Japanese policies to lower child-rearing costs, such as reducing school fees and providing convenient childcare, childbirth subsidies, and housing benefits to young couples. But Japan's approach has proved expensive and ineffective: the country's fertility rate received a temporary boost, from 1.26 in 2005 to 1.45 in 2015, before falling back to 1.23 in 2022. Moreover, because it is "getting old before it gets rich," China lacks the financial wherewithal to emulate Japan.

There are both physiological and cultural reasons for China's demographic crisis. With more women delaying marriage and childbirth, the country's infertility rate has increased from 2% in the early 1980s to 18% in 2020. From 2013 to 2021, the number of first marriages fell by more than half, and by three-quarters for 20-24-year-olds. And the one-child policy, which had been in place for 36 years, has irreversibly changed Chinese views of childbearing: having one child - or none - has become the social norm.

The more recent the cohort of Chinese women, the less willing to have children they seem to be. One recent survey found that while the average number of intended children among women in China is 1.64, the average decreases to 1.54 for women born after 1990 and 1.48 for women born after 2000. For comparison, in South Korea and Hong Kong, the average intended number of children is 1.92 and 1.41, respectively (both fertility rates are roughly half the intended figures). If this declining interest in childbearing is any indication, China will struggle to stabilize its fertility rate at 0.8, and its population will fall to less than 1.02 billion by 2050 and 310 million in 2100.

Ancient China also experienced population declines due to war and famine, but recovered quickly, similar to blood loss with normal regeneration. Modern population declines, like aplastic anemia, are hard to recover from.

Even if China succeeds in increasing its fertility rate to 1.1 and prevents it from declining, its population will likely fall to 1.08 billion by 2050 and 440 million by 2100. The country's share of the world's population, which declined from 37% in 1820 to 22% in 1950-80, will fall to 11% in 2050 and 4% by 2100.

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