China is eliminating fines for families who have more children as birth rate falls

“Fertility levels and new births are expected to keep falling this year, based on our monitoring of birth and population in the first half of 2021,” Yu Xuejun, deputy head of the National Health Commission, said at a briefing in Beijing. China will roll out more supporting measures to optimize birth policy, Yu said.

The announcement came a day after the government said it would try to make it cheaper to raise children and would get rid of fines and punishments for married couples who had a third child. The declining birthrate means China’s population, currently at 1.41 billion, may begin to shrink before 2025, according to Bloomberg Economics’ estimates.

“Implementing the three-child policy and supporting measures is aimed at preventing further declines in the birth population, realizing moderate fertility levels and promoting balanced population development in the long run,” Yu said Wednesday. Whether the nation can turn the situation around in the long term depends on how supporting policies are implemented, he added.

The government decision to abolish fines and other punishment measures against those who have more children than allowed “basically equals removing birth restrictions all together,” according to He Yafu, an independent demographer. However, the decision is “still a bit too late.”

Amid the uncertainties of the coronavirus pandemic, the number of births in 2020 was the lowest in almost six decades. That has been declining steadily since the 1960s, with a small and temporary uptick following the introduction of a nationwide two-child limit in 2016.

Despite the rapid slowdown in the growth rate of the population, China has been able to maintain rapid economic expansion in recent decades, with migration to cities and rising education-levels propelling a shift from agriculture to factory and service work, which increased economic output per worker.

“We will face a shift in labor supply from abundance to shortage,” People’s Bank of China policy board member Cai Fang said in a recent speech. “Economic growth may be constrained by lagging consumer demand.”

“As China’s labor force gradually loses its competitiveness and our demographic dividend begins to disappear, the only thing we can rely on is to increase productivity,” said Cai, a prominent economist who often speaks on demographic and income issues.

—With assistance from Jing Li and Bihan Chen.