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Is Three Company?

With parents not rushing to embrace the three-child policy, China contemplates support measures to boost the birth rate, ranging from cash incentives to paternal leave

By Chen Weishan Updated Nov.1

Newborn babies in a hospital in Gansu Province

After announcing that families will be allowed to have three children, another major loosening of the previously strict family planning policy, attention has turned to what material support the government will offer to these families, and even if people are willing to have more children at all.  

The announcement came on August 20, when the National People’s Congress, China’s legislature, passed an amendment to allow couples to have three children, as well as stating there would be supportive measures.  

The move followed a high-profile announcement by the Political Bureau of the Communist Party of China (CPC) Central Committee on May 31, which marked a major policy shift from restricting births to encouraging births. The fact that it took less than three months for the policy to become law, which went into effect immediately, reflects the urgency China’s top leadership feels about the country’s rapidly declining birth rate.  

According to data from China’s 2020 national census released by the National Bureau of Statistics (NBS) in May, China recorded 12 million births in 2020, an 18-percent drop from 2019, when 14.65 million births were recorded. It was the fourth consecutive year of falling births, which drove China’s overall fertility rate of women of childbearing age to a mere 1.3, putting China alongside countries like Japan and Singapore.  

Besides allowing couples to have three children, the amendment to the Population and Family Planning Law dropped restrictive measures such as fees and fines on couples who have more than three children, which means couples will not be punished even if they have more than three children. Some believe that China could soon remove the birth cap altogether in 2022.  

A new consultation department for couples preparing to have a third baby in Zhongda Hospital, Southeast University, Nanjing, June 23

Indirect Measures 
But what attracted more attention is the “support measures” highlighted in the law amendment. While the amendment does not offer specifics, it said the government should reduce the cost of childbearing and parenting by adopting policy tools in tax, insurance, education, housing and employment. It also said the government should offer parental leave and establish more nursery facilities in residential communities and workplaces.  

The amendment triggered heated discussion and debate about what kind of measures China should adopt to boost fertility. So far, measures taken by the central government are mostly indirect. In 2019, the government started offering families tax deductions for educational expenditure for children over 3 years old. After the amendment was passed, officials hinted that expenditure on education for children below 3 will soon be tax deductible.
In summer 2021, China launched a harsh crackdown on the previously booming private tutoring industry. Dubbed “double reduction,” the new regulations prohibit businesses from offering classes for core school subjects on weekends and school holidays and put a cap on chargeable tutoring fees.  

The authorities said the goals are to ease the burden and stress for Chinese parents, which many believe a major factor deterring younger couples from having children.  

Following the same rationale, some cities, including Beijing, launched policies to increase education equity, including rotation of primary and secondary school teachers and delinking school admissions and property ownership of parents.  

But many experts feel that indirect measures alone will not be enough to reverse the declining birth rate. China now needs to adopt direct measures such as financial incentives to encourage couples to have children.  

According to He Yafu, a demographer, without effective measures the “three-child” policy will have a marginal impact. “Survey data showed only 10 percent of those who have two children want a third,” He said.  

As China’s previous policy loosening which allowed families to have two children only led to an additional 2-3 million births each year, he told NewsChina that the threechild policy alone will only result in 200,000- 300,000 additional births. “Without further incentives, the impact of the policy will barely be felt,” He added.  

Cash Handouts 
Over the summer, some local governments started offering cash incentives to parents. On August 2, Panzhihua in Sichuan Province announced it would hand out a monthly cash subsidy of 500 yuan ($77) per baby for couples that have a second or third child until they turn 3. It is equivalent to about one-seventh the average monthly disposable income of urban residents and one-third for that of rural residents in the city in 2019.  

The city’s move triggered a debate between experts on how far China should go in providing financial incentives to boost the birth rate. “Given China’s huge population, China should be very careful about offering cash incentives,” said Song Jian, professor and deputy director of the Center for Population and Development Studies at the Renmin University of China, “Once you start to give cash handouts, how you sustain it in the long term becomes a major challenge.” 
According to Song, Panzhihua’s move is an isolated case, as the cash handout does not specifically aim to boost the fertility rate, but is a part of a policy package to attract talented workers. The city’s general secretary Shen Jian told the media that Panzhihua aimed to increase its population from 1.2 million to 1.5 million by 2025.  

But for other experts, it will be too late for China to reverse the demographic trend if the country does not offer substantial financial support to parents.  

“Regardless of its purpose, it [Panzhihua’s move] is a good starting point,” said He Yafu. He argued that if China is still hesitant about increasing its expenditure on family support, the window of opportunity will close as authorities are forced to substantially increase expenditure on taking care of the aging population. “It is a now-or-never situation,” He added.  

Child-friendly Society Needed 
Liang Jianzhang, an economics professor and demographer at Peking University and CEO and cofounder of travel site Ctrip, said China is only spending 1 percent of GDP on childbearing-related expenditure, which is far below what is necessary to address its demographic crisis.  

In a widely shared article published on social media in May, Liang compared public expenditure on childbearing-related benefits and fertility rates in some 20 developed countries, and found that to boost the fertility rate by 0.1 would require additional expenditure of 1 percent of a country’s GDP.  

Liang concluded that China needs to spend 2 percent of its GDP to improve its fertility rate to the level of Japan, 5 percent to the average level of developed countries or 10 percent to raise the fertility rate to the replacement level of 2.1.  

Regarding the issue of affordability, with one of the world’s highest savings rates, China is well-positioned to substantially increase spending on boosting fertility. In past years, China has made colossal investments on infrastructure such as roads and railways, and as needs in these areas are saturated, China should shift its investment focus to supporting families, Liang said. 
While debate continues about how far China should go to with its “supportive measures,” the current consensus is that childcare facilities need to be built and subsidized by the government. 

Song said that China used to have a robust State-funded childcare system under the planned economy until it disintegrated in the 1990s as a result of economic liberalization. Since then, the cost of childrearing was handed over to families.  

According to survey data released by the National Health Commission of China, among China’s 40 to 50 million children under 3, only about 5 percent have access to childcare facilities, with the majority primarily taken care of by family members, often seniors. “It is very clear that Chinese families have now become overwhelmed with that burden,” Song said, “It is time for the State to shoulder that responsibility again.”  

For He Yafu, the underlining problem with China’s low fertility rate is that Chinese society has increasingly become hostile toward would-be parents. Children are often perceived as a liability rather than an asset.  

Besides lowering childbearing costs and offering financial support, He said that a major policy focus should be on the protection and promotion of women’s career opportunities. For a long time, Chinese women have struggled with workplace discrimination often based on their marital and parental status. Many experts believe this is one of the biggest factors behind China’s falling fertility rate.  

It was reported that in order to encourage couples to have more children, the government is considering to increase the length of parental leave, although this could lead to a worse situation for working women. According to He, the government should opt to subsidize parental leave and offer tax rebates to employers based on the ratio of their female workers.  

“The fundamental question for policymakers is how to make Chinese society more child-friendly,” He said.