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A Major Reversal

February 27, 2023 | Posted in: Wealth Strategies

My 2022 paper How Did That Happen? discussed in some detail the long-term impact of China’s One Child Policy which was in place from 1980 until 2016. That policy generated an unintended consequence which is a declining population, and in particular, a steep decrease in the working-age population. The likely impact of a declining population is slower economic growth and rising wages which may also spill over into other places given China’s large role in world trade.

Well, Nicole Hong and Zixu Wang of the New York Times reported yesterday that China has completely reversed course and is now taking major steps to increase its population. After allowing two children in 2016 and then three in 2021, several provinces are now permitting an unlimited number, even for unmarried couples. By way of context, out-of-wedlock births have historically been taboo! Several cities are encouraging college students to donate sperm and there are plans to provide national insurance coverage for fertility treatments, including in-vitro fertilization. According to Hong and Wang, all of these steps may have little impact because the major deterrent to having children continues to be their cost, irrespective of the change in government policy.