China’s birth rate has been dropping steadily in recent years, creating a shrinking workforce and mounting burdens on the state pension system. There were only 8.5 births per 1,000 people in 2020, the lowest rate since the People’s Republic of China was established 1949. But the government could spend its way out of this demographic collapse, according to a top Chinese economist.
Ren Zeping, the former chief economist for debt-laden property giant Evergrande, is known for his outspokenness. He proposed that the Chinese central bank should print an additional 2 trillion yuan ($314 billion) to set up a fertility fund. This could help the country to have 50 million more babies in 10 years’ time, according to a memo (link in Chinese) issued by Ren, now the chief economist at brokerage Soochow Securities, and his team on Jan. 10.
“Based on surveys, the two major reasons stopping people from having children are high property prices and the high costs of raising children…Hence, lowering the costs of having and raising children is the major solution,” it said, citing an online poll in which more than two-thirds of around 5,000 respondents support a national fertility fund.
Last year, local and central governments rolled out policies that include allowing people to have three children, and extending paid maternity leave, but families still say they can’t afford to have kids. Some, including Ren, criticized authorities for putting the burden (Chinese) on companies that may now be less inclined to hire women.
Ren’s core message is greater state support for people to have children.
The fund should be rolled out as soon as possible to catch the fertility window of those born between 1975 to 1985, as younger generations are much less likely to even get married, let alone have kids, his memo said. China also needs a better child care system, allow families to decide the number of children they want to have, and improve the protection of women’s employment rights while giving companies birth-related tax benefits, it adds.
Is Ren Zeping “grandstanding”?
As one of China’s highest-paid and most well-known economists, Ren’s post has drawn much attention and stirred heated discussion on the Chinese internet, where many people said the proposal goes against basic economic principles and would push up inflation.
One of the harshest criticisms comes from an opinion piece (Chinese) published on state media outlet The Paper, which slams Ren as an “internet celebrity economist” who is “trying to get attention.” The piece is titled “Let there be less Ren Zeping-style grandstanding.”
In response, Ren today posted on Weibo, saying that the additional 2 trillion yuan needs to be printed every year, and that it is calculated based on the 2% to 3% fertility-related spending as a percentage of rich countries‘ GDP. Ren assumes China’s GDP has reached 110 trillion yuan ($17 trillion). (China has yet to release its 2021 GDP figure but there are estimates of it exceeding 110 trillion yuan during the period.)
As to why the 2 trillion yuan needs to be printed instead of coming from China’s budget, Ren said it is because coronavirus has drained everyone’s finances: the government, families, and corporates. “Hence, we need to print money to have babies.”