Economic Analysis Of China’s Adjustment Of Her Population Policy

As China is a country with the biggest population, her population policy hasalways been the focus of many. Different from the perspectives of previousresearches, efforts have been made in this paper to analyze China’s adjustment of herpopulation policy with economic methods and means together with the institutionalarrangements in economics and law as a perspective. The major argument is that thegeneral application of the second child policy will be beneficial to China’sharmonious future economic and social development.This paper reviews researches on population in the development history ofeconomics, namely, the different schools and viewpoints of scholars. It is held thatalthough there are different views concerning the economic analysis of populationproblems, researches have largely been centered around the effect of populationgrowth on social and economic development. And the major conclusions reachedinclude moderate population growth, strictly regulated population growth andunlimited population growth. With these conclusions as the starting point of thisresearch, this paper classifies the population theories in economic into three types,namely, moderate population theory, pessimistic population theory and optimisticpopulation theory. The moderate population theory holds that population growth canhave positive as well as negative effects. Within certain limit, positive effect willcome along, while once this limit is exceeded, negative effect will appear. Thepessimistic population theory emphasizes the negative effect of population growth,while the optimistic theory emphasizes the positive effect. After due summary ofthese theories, it is held in this paper that population policy should be dynamic andchange with economic and social conditions and developments. Foreign scholars mainly concentrate on the family planning policy adopted byChina since her Reform and Opening-up, while domestic scholars focus theirattention mainly on the possibility of further loosening the birth control policy andthey can be roughly divided into two groups. One is for the loosening of the birthcontrol while the other is against it. At the present stage, most of Chinese scholarssupport the loosening of our population policy and urge that it’s high time we adoptthe second child policy generally.By reviewing the historical evolution of China’s population policy, we find thatat the founding of the PRC, we did not have specific population policy. With theimprovement of our living conditions and the medical care, the mortality rate of thenew-born decreased immensely while the general life span increased greatly, whichcontributed to the fast growth of our population. With the negative effects take hold,China ushered in the family planning policy, and established it as a basic nationalpolicy. The main contributions of this policy to our economic and socialdevelopments consists of the exaltation of our population quality, the reduction ofoverall birth rate, the enhancement of our economic growth, the relieving of thecontradiction between supply and demand, the improvement of our living conditions,and the promotion of the social status of the female. Meanwhile, this policy also hasnegative effects. First, our overall birth rate is far lower than is necessary forreplacement. Now our overall birth rate is1.4, very close to1.3, the sign of lowfertility trap. Second, the aging of our population has become a serious problem. Atpresent, the number of senior citizens aged above60amounts to14.9%of the totalpopulation, while the matter is becoming even worse. It is estimated that as of theyear2050, it will reach30%. Third,our labor force is diminishing. At present, thenumber is1billion, while as of2050, it will decrease to0.8billion with20%gone.Fourth, our economic growth is losing speed. Fifth, there is a big gap betweenpeople’s will of have more than one child and the actual need. Sixth, there exists an imbalance of gender. The normal rate is102:107, while our rate is118:108. Seventh,the reverse elimination of the high quality population is obvious. The high qualitypopulation tends to have less children than those below them. Eighth, the number offamilies which lost their only child. Now we have about1million families with theironly child dead, and the number increases by76000every year. Ninth, there is a bigtension between cadres and citizens. With the above summaries as a basis, we assertthat China should adjust her population policy immediately.This paper performs micro-economic analysis on the birth behavior of Chinesefamilies with a view to examine and estimate the costs and benefits of the child birthbehavior of Chinese families. We hold that the actual choice of giving birth isdetermined by the cost and the will to give birth is determined by the benefit thereof.We believed that the policy of second child for spouses with at least one as an onlychild wrongly equates will of giving birth with the actual behavior, thus ignoring thecosts involved. With the huge costs involved in raising a child, good will cannoteasily be transformed into actual choice. Thus the policy effect cannot be as good asexpected. Moreover, this policy bears negatively on the natural increase of birth rate.Therefore, it is held in this paper that China should immediately adopt the policy ofgeneral second child and the cost distribution of raising child should also be exacted.We even believe that the latter policy is also of a transitional nature and in the finalanalysis China should abandon her birth control policy completely, i.e. voluntarybirth without governmental interference.Macro-economic analysis of the adjustment of population policy has also beenperformed in this paper. With economic growth, unemployment and inflation as threevariables, efforts have been made to analyze the necessity and possibility of thetransition from second child for couples with at least one of them having no siblingsto general second child for all family. The Solow growth model and endogenousgrowth analysis show that this transition will contribute to the future improvement of people’s living conditions. The AS-AD model helps to show that this policytransition will fend off the danger of high inflation. The Okun’s Law and the PhilipsCurve help show that this transition will be beneficial to the most effectivesubstation between economic growth, unemployment and inflation. All in all, it isheld that this policy change will be of help to China’s future economic development.All in all, this paper holds that the universal second child policy will bebeneficial to our social and economic development. The economic effects include:first, it will help enrich the labor force and increase the age rate. Second, it will bebeneficial to increase capital stock. Third, it will stimulate technologicaladvancement. Fourth, it will have little effect on natural resources and theenvironment. As for the social effects, first, it will help realize the healthydevelopment of our social security system. Second,it will help promote the genderstructure and age structure of our population. Third, it will not cause furtherunemployment. Fourth, it will not reduce people’s living quality.Finally, the population data after our policy adjustment has been predicted andwith the lessons learned from foreign experiences and the principles of ouradjustment as a basis, suggestions have been proposed concerning the adjustment ofour population policy.The above analysis shows that the cost of the policy of universal second childcan be counterbalanced by the social and economic benefits, while at the same time,the general social welfare will be improved, which accords completely with theKarldor-Hicks Principle. What’s more, the reason why this paper asserts that ourpopulation policy should be adjusted immediately is because unlike other policies,population policy will take longer time to reveal its effect, usually two or threedecades. Once the best chance is lost, the consequence cannot be made up with ease.We should view this policy change with long term perspective and with dueprediction of future development, we should adjust our policy beforehand. Our population policy should not be static but dynamic and timely adjustment should beperformed according to objective economic conditions. While at the present stage ofdevelopment, the universal second child policy is undoubtedly the best choice. Thisis not only the precondition of further economic development, but also that ofpopulation safety. While for the future direction of our policy, efforts should be madeto allow population policy to approximate people’s will of child birth. This is amanifestation of our human-oriented conception while at the same time, it can helppromote population quality and social and economic development.