On January 10, “Zeping Macro” published the article “The Solution to Low Fertility Found – China Fertility Report”, saying that a fertility encouragement fund should be established as soon as possible. 50 million children to solve the problem of China’s aging population and low birth rate. The suggestion has sparked heated debate. Some scholars, including economist Wang Xiaolu, have raised some doubts. We believe that although the strength and specific methods of encouraging fertility need to be refined, in general, it is a good start to use 2% of GDP to encourage fertility, and it is feasible and necessary under the current population and economic situation. . We specifically respond to these typical questions below.
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Liang Jianzhang and other Yuwa population research scholars
Question 1: Is it necessary to print money to encourage fertility?
Wang Xiaolu is a rigorous economist, and we agree with some of his views. For example, Wang Xiaolu believes: “The development of population, like economic development, needs to follow its own laws and maintain long-term stable development.” Then, a country’s How can the population maintain long-term stable development? It is to keep the fertility rate around the replacement level. However, China’s fertility rate has been below replacement level for 30 years, and the fertility rate in 2020 is even lower than that of Japan, which is suffering from severe birth reduction. In this case, it is absolutely necessary to introduce policies to encourage fertility to increase the fertility rate.
However, there are still some deviations in Wang Xiaolu’s understanding of population issues. For example, he said: “In the past, birth restrictions were imposed, and if you had more births, you would be fined desperately; today, I hope everyone has more births and spend a lot of money to stimulate; such a policy lacks long-term vision. .”
We believe that the policy of “restricting births in the past and fines them if they have too many births” is inherently wrong. There are more than 200 countries and regions in the world. Except for mainland China, almost no country or region has implemented the policy of “having too many births.” Now, many low-fertility countries have implemented policies to encourage births, that is, “I hope everyone has more births and spend a lot of money to stimulate them.” It is inappropriate for Wang Xiaolu to juxtapose the wrong policy of “you will be fined if you have too many births” with the correct policy of “I hope everyone has more births and spend a lot of money to stimulate them”.
According to the “China Population Forecast Report 2021 Edition” released last month, China’s fertility rate in 2021 is likely to have dropped to 1.1, one of the lowest in the world. China’s cost of raising house prices and education relative to income is also the world‘s The highest, so we must learn from France, Sweden and other countries, and launch policies to encourage fertility to reduce the cost of parenting. If the current ultra-low fertility rate cannot be improved, China’s population will rapidly decrease in birthrate and age, which will have a serious negative impact on innovation and overall national strength. According to this trend, by 2050, it will decrease to 1.264 billion. In 2100, China’s population will drop to 685 million, and its proportion in the world will drop from 18% now to 6.5%, while the new-born population is only 2.56% of the world‘s new-born population. By then, China will no longer be a populous country. According to this trend, the population advantage accumulated by the Chinese nation for thousands of years will be completely lost within 100 years. In order to maintain the sustainable development of society and pass on the success of the Chinese nation, we must vigorously encourage fertility.
Question 2: Will printing money to encourage fertility cause inflation?
So, printing an extra 2 trillion a year to encourage fertility, will it cause inflation? If employment is already sufficient and production capacity is fully utilized, additional demand will of course cause inflation, but now that China is facing excess production capacity and insufficient demand, printing money will not cause inflation, but can digest production capacity and promote full employment.
If 5 million more children are born every year, it will increase the demand for food, clothing, housing and transportation. Of course, before the child is 3 years old, the main expenditure is on food and clothing, and the expenditure on housing and transportation is very small. According to data from the National Bureau of Statistics, in 2020, the per capita consumption expenditure of national residents will be 21,210 yuan, of which food expenditure will account for 30.2%, clothing expenditure will only account for 5.8%, housing expenditure will account for 24.6%, and transportation expenditure will account for 13%. %. If the per capita consumption expenditure of these extra-born children is the same as the national average, then the total consumption expenditure of 5 million children is 106 billion yuan a year, accounting for only 0.35% of the total national consumption expenditure, so there will not be much inflationary pressure.
To build a nursery before the child is three years old, it may need to add hundreds of thousands of childcare workers. Now China still has a reorganized labor force, which is just to solve the employment problem. After the age of 3, there is a demand for kindergartens and primary schools, but at present, China’s kindergartens and primary schools have been allocated according to the population of more than 17 million. If the birth population is only 15 million, then from the whole country, there is basically no need to expand primary schools and kindergartens. construction plan.
In short, under the current circumstances, adding millions of children every year will not cause inflation, but can digest production capacity and promote employment. It is a good means to stimulate the economy during the economic downturn.
Question 3: Encouraging childbirth without money
Of course, the medium- and long-term expenditures to encourage fertility cannot always be done by printing money, but should be done by adjusting China’s investment structure. Encouraging the birth of more children can help stimulate consumption and investment confidence in the medium term; in the long run, an increase in population can enhance China’s innovation and competitiveness.
Some economists believe that the country simply does not have the financial resources to spend a few percent of GDP to encourage fertility. But we believe that China has the most resources to encourage fertility, because China’s investment rate is ten to thirty percent higher than that of other developed countries. It can be said that the Chinese are the most willing to invest in the future in the world. So where did the high investment rate go? Invested in various fixed assets such as infrastructure, factories and so on. The boom in urbanization and manufacturing in China is partly due to very high investment rates. In the future, China’s infrastructure and factory construction needs will be saturated, so it is fully capable of taking part of the excess investment in fixed assets to encourage fertility. In the long run, the essence of child subsidies is to invest in the future of the country’s human resources. Compared with the current Chinese economy that is generally “overcapacity”, investing in human resources is precisely the choice with the highest return.
Whether there is money to encourage fertility depends fundamentally on one thing – is it important for the country to raise the fertility rate? If raising the fertility rate is considered unimportant, then there is certainly no money in encouraging fertility, because there are many more important programs that need to be spent. If it is considered that raising the fertility rate is very important to the country, or even the top priority of the country, then more social resources should be directed to families with children to make up part of their childcare costs. Especially now that the economy is sluggish and there is insufficient employment, stimulating the economy by encouraging births is a policy that kills two birds with one stone.
Question 4: Is it useful to encourage fertility?
Whether encouraging fertility is effective or not depends on the data. We have done a correlation analysis on the fertility encouragement and fertility rate of various countries. The results show that if an average of 1% of GDP is used to encourage fertility, the fertility rate will increase by 0.1. Of course, this is only a correlation, it can only support rather than prove It is effective to encourage fertility. But there is no data to support the ineffectiveness of encouraging fertility. Some northern and western European countries have introduced generous fertility policies and achieved relatively high fertility rates. For example, France and Sweden both contribute 3-4% of GDP to encourage fertility, and their fertility rates are also 1.8 to 1.9, which is close to the replacement level. In contrast, the efforts to encourage fertility in southern European countries are generally only 1-2% of GDP, and the fertility rate is generally lower than 1.5. In recent years, Germany has stepped up its efforts to encourage fertility, which was originally low, and the fertility rate has also increased.
Some people say that Japan has always encouraged fertility, but the fertility rate is still very low. In fact, if the European developed countries are used as a reference, East Asian countries, including Japan, have relatively low efforts to encourage childbirth, and the expenditure to encourage childbirth generally only accounts for 1-2% of GDP. Is it true that Japan’s encouragement of fertility is ineffective? We should ask, if Japan does not encourage fertility, how low will the fertility rate be? It is likely to be much lower than it is now. Thanks to its measures to encourage fertility, at least Japan’s fertility rate is relatively high among East Asian countries and regions. South Korea’s parenting costs, such as housing and education costs, are higher than Japan’s, and its efforts to encourage fertility are not as strong as Japan’s, so its fertility rate has fallen below 1. China’s housing prices and education cost pressures are higher than Japan’s. If fertility is not encouraged, China’s fertility rate will definitely be far lower than Japan’s. China’s big cities, such as Beijing and Shanghai, already have the lowest fertility rates in the world. According to the sixth census data, it is only about 0.7. If the fertility rate is raised to the level of Japan by encouraging fertility, it will be very effective.
Question 5: We have robots and artificial intelligence in the future, do we need so many people?
In the future, the jobs of many industrial workers can indeed be replaced by robots and artificial intelligence, but the most critical scientific research innovations still need to be done by humans. The talent pool is large, and there will be more top scientific and technological talents. There is also a large market size, and more R&D resources and personnel can be invested. Therefore, the scale of talents and the scale of the market are the guarantee for the competitiveness of national scientific and technological innovation. In the past, the rapid development of China’s technological innovation benefited from the world‘s largest talent scale and market scale, and formed the world‘s most complete industrial chain. Therefore, although China’s per capita income is still far lower than that of the United States, its comprehensive national strength has already followed closely behind. Even under the pressure of the U.S. trade war and neck-stuck, it is still able to cope with it. Just imagine that if China’s talent and market size shrink at the rate of halving each generation, its future international competitiveness, especially its ability to resist suppression in an unfriendly external environment, will be much weaker.
Without strong policies to encourage fertility, the rate of our population decline would be halved each generation. In 2020, China’s total fertility rate is only 1.3, which is lower than that of Japan, which is severely low birthrate and aging. Only 12 million people were born in the whole year, the lowest birth rate on record. Evidence suggests that fertility will fall further to around 1.1 in 2021, with births likely to drop to around 10 million. Less than half of what it was in the early nineties. The declining birthrate will have a profound impact on China’s economic growth potential, innovation vitality, support burden, people’s happiness index and even national rejuvenation. And, as long as the fertility rate remains below the replacement level of 2.1, the population will eventually die out. Therefore, in order to maintain the sustainable development of society and pass on the success of the Chinese nation, vigorously encourage fertility and raise the fertility rate to 2.1 sooner or later, and it must be done.
Three specific measures to encourage fertility
In fact, it is not enough to use two trillion a year to encourage fertility, and it is not enough to raise the fertility rate to the replacement level. In the long run, the problem of low birthrate facing China is the most serious in the world. Therefore, it is necessary to take the greatest measures to encourage fertility in order to significantly increase the fertility rate. At least four or five trillion yuan is needed to encourage fertility every year. Specifically, there are three main measures to encourage fertility:
The first is cash and tax subsidies: for each child in a two-child family, a monthly cash subsidy of 1,000 yuan will be given. Give each child of a multi-child family a monthly cash subsidy of 2,000 yuan until the child reaches the age of 20. For families with two children, income tax and social security are halved, and families with three children are exempted from income tax and social security (for particularly wealthy families, a ceiling can be set for the cap). In total, the cash and tax cuts will require 2-3 trillion yuan per year, or about 2-3% of GDP.
The second is housing subsidy: the specific method can be subsidized through mortgage interest rebate or housing price discount. For example, 50% of the mortgage interest for a two-child family is returned, and the mortgage interest for a three-child family can be fully subsidized and returned (a ceiling subsidy can be set). The cost of this part of the subsidy may be around 2 trillion per year, which can be fully covered by increasing the local land supply.
The third is to build more nurseries: increase the enrollment rate of children aged 0-3 from 4% to about 50%. According to the calculation of 40 million children aged 0-3, each child will subsidize 20,000 yuan in operating expenses. Combined with the target of 50% of the enrolment rate, about 400 billion yuan of financial subsidies will be needed every year.
The financial funds required for the above-mentioned fertility encouragement measures account for about 5% of GDP. The boosting effect of 5 trillion on the economy is obvious, but what is more valuable is that these investments have a longer-term return than previous infrastructure investments. Encouraging the increased number of children born will help to expand domestic demand, stabilize growth and employment in the short term, and in the long run will help improve human resources, human capital, economic and social vitality, and enhance confidence in China’s economic development.
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