China must go all out to boost its birth rate, leading demographer warns

Dr. Wenzheng Huang says China's current incentives fall far short, argues lifting fertility to replacement level within 5-15 years could leave China 20-40 times stronger than if it waits decades.

China has realized that its depressed fertility rate is quietly breeding serious long-term consequences — and a shrinking headcount is only the most immediate, surface-level symptom.

Sensing the danger, some local governments have begun throwing serious money at the problem, rolling out cash bonuses and support schemes that have, in a few places, nudged birth rates up in a real and measurable way. (See my recent piece: A small Chinese city offers handsome cash to boost births. It worked.)

But in Dr. Wenzheng Huang黄文政's view, these efforts barely scratch the surface. As he puts it, "on a scale of 0 to 100, China has barely put in only 3 points of effort."

Dr. Huang earned his master's degree at the Institute of Systems Engineering at Shanghai Jiao Tong University before heading to the United States, where he completed a PhD in biostatistics at Johns Hopkins University.

In recent years, he has been one of the most persistent voices calling for a sharp U-turn in China's population policy, co-authoring numerous pieces on demographic trends with another leading Chinese demographer, James Jianzhang Liang (梁建章).

Today's newsletter features a 2024 essay by Dr. Huang titled "Demography is Destiny: Four Futures Under Different Fertility Incentives.人口即命运—不同生育激励下的四种未来."

In this piece, he notes that China's total fertility rate in 2022 stood at just 1.07 — roughly half the replacement level. In other words, each new generation is far too small to replace its parents, let alone sustain a stable population.

That shortfall, he argues, will first hit baby formula and education, then work its way through the housing market and healthcare system, and ultimately weigh on growth while amplifying social tensions.

Dr. Huang contends that restoring fertility to the replacement level is something China must achieve — and the earlier, the better — because population dynamics shape economic performance, social stability and even the country's international standing.

If China can return to replacement-level fertility within 5-15 years, he calculates, its future level of development will be far higher than if it only achieves that goal 80-120 years from now; under the earlier scenario, China's overall national strength would be 20-40 times that under the latter.

When it comes to policy, Dr. Huang insists that fertility is not guided by fate but by incentives. He argues that families raising children should enjoy stable, predictable income support, and proposes creating a national population fund to anchor that commitment.

He also calls for a top-level body, led directly by state leaders, to take charge of pro-fertility policy and decisively sweep away the old family-planning mindset.

Below is my translation of Dr. Huang's essay. Please note that Dr. Huang does not review the following translation.

人口即命运—不同生育激励下的四种未来

Demography is Destiny: Four Futures Under Different Fertility Incentives

[Introduction] The intensity of fertility incentives influences people's expectations about the future, which in turn directly affects current economic performance, fiscal revenues and expenditures, living standards, and even other countries' stances towards China and the stability of the political situation. The point of development is to ensure our continuity and improve our quality of life, not to become the world's worker bees — working hard without leaving descendants.

Restoring the fertility rate to the replacement level is something China must achieve, and the earlier the better. If China can bring fertility back to replacement level within 5–15 years, its future level of development will be far higher than if it only reaches that target in 80–120 years. Under the earlier scenario, China's overall national strength would be 20–40 times that of the latter. I will further explain this judgment in follow-up articles.

I. Current demographic trends and their implications

According to data released by the National Bureau of Statistics on January 17, 2024, there were 9.02 million births and 11.10 million deaths in 2023, resulting in a population decline of 2.08 million. The number of births matched my earlier forecast almost exactly, while deaths were lower than I had expected. As the fertility intentions that were suppressed during the COVID-19 pandemic gradually recover in the next year or two, the number of births in 2024 is likely to see a slight rebound and may even return to around 10 million. (Note: The official data said the 2024 births was 9.54 million)

Based on the 1953 census and life tables for selected regions during the Republican era, the number of births in 1929 was roughly 17–18 million. According to total population estimates from various periods of the Qing Dynasty, the current birth population has fallen back to the levels of the mid-Qing Dynasty.

The fertility rate — understood in simple terms as the average number of children each woman has — is the core indicator that determines long-term demographic trends. If fertility is at replacement level, the number of newborns will roughly match the size of their parents' generation.

Given China's sex ratio at birth and female survival rates, the replacement level is about 2.15, meaning that each woman needs to have, on average, 2.15 children to maintain generational balance and keep the number of births broadly stable.

With improvements in healthcare conditions, all countries have experienced population growth due to increasing life expectancy. However, over the past 200 years, China's fertility rate has been significantly lower than that of most countries relative to its own economic development level, resulting in China's population growth rate almost always lagging behind the global population growth rate.

China's share of the world population was 34% in 1820, 21.8% in 1950, and 22.1% in 1980, dropping to 18% by 2022. Meanwhile, China's birth population now accounts for less than 7% of the global total. With a fertility rate less than half the world average, China's birth population will fall to 3%-4% of the global total within one generation, or about 30 years. Unless China's fertility rate significantly increases to the world average thereafter, its share of the world population will eventually plateau at no more than 3%.

Based on birth population projections, China's fertility rate in 2022 was 1.07, only half the replacement level. In contrast, the fertility rate calculated from sample surveys was 1.05. Given the current intensity of fertility encouragement policies, the fertility rate will only continue to decline. South Korea, with far greater fertility encouragement efforts than China in recent years, saw its fertility rate drop from 1.05 in 2017 to 0.78 in 2022.

As long as the fertility rate remains significantly below the replacement level, population shrinkage will continuously accelerate; demographic structural effects will only add fluctuations to this trend without fundamentally altering it. Currently, China essentially sees one birth for every death.

However, if the fertility rate remains at the current level of 1.07, by the time today's newborns reach their expected age of death, China's total population will shrink at a steady rate of at least six deaths for every birth, eventually approaching zero. By then, the aging level will peak and remain at that peak.

The decline in birth population will sequentially affect various industries:
(1) Within 0-5 years: infant formula, children's products, and childcare services;
(2) After 5-20 years: education, food, and clothing;
(3) After 20-50 years: housing, furniture, home appliances, consumer electronics, automobiles, tourism, and entertainment;
(4) After 50 years: healthcare, elderly care, and funeral services.

The impacts on these consumer-facing industries will gradually transmit to business-facing sectors. These effects involve not only the shrinkage of actual demand but also declining expected demand, leading to sluggish domestic investment willingness and accelerated capital outflow and emigration of affluent populations.

This explains why the actual impact of the birth population collapse starting in 2016 on consumption demand will only manifest over a decade later, yet economic growth momentum has already begun to wane.

In the short term, shifting production capacity overseas and relying on external circulation can sustain investment returns and corporate competitiveness. However, if the domestic market continues to shrink, these capacities may easily be localized as assets of other countries, even fostering local industrial development that becomes China's competitors. As China's industrial weight declines, Western countries will feel even less restrained in squeezing Chinese firms.

In a shrinking industry, businesses naturally move from "opening up new frontiers" to "fighting over a fixed pie," exacerbating workplace competition and burnout. Declining market scale reduces the efficiency of demand-supply matching, raising overall unemployment rates, particularly manifesting as mass unemployment among middle-aged adults.

With accelerating population decay, numerous rural areas and small towns will decline or disappear, medium-sized cities will become small cities, and large cities will become medium-sized cities. The number of cities available for choice at equivalent scales will continuously decrease, narrowing people's options. During this process, the population will continuously contract toward a few central cities, and even these cities will experience population decline.

As demand and financial capacity diminish, infrastructure construction will slow significantly, with much of the existing infrastructure aging, deteriorating, or being abandoned. Urban landscapes will gradually decay. Residents in each city will face dwindling choices, with airports, stations, hospitals, schools, residential areas, parks, and office buildings becoming increasingly outdated. Compared to a scenario with a stable population, living standards will be relatively lower, and society may even face humanitarian crises.

Under such population trends, China will struggle to maintain its full industrial chain advantage, and its technological competitiveness relative to Europe and the U.S. will first rise then fall. In areas where China still lags, gaps may widen further, while in fields where China leads, it may be overtaken.

Currently, India has 17% more college students than China, and this number will be several times higher in the future. Even the annual number of Indian college entrants may far exceed China's cohort size, though this does not mean India's technology will surpass China's in the foreseeable future.

China's current pride in major projects like aerospace, high-speed rail, large aircraft, and the BeiDou navigation system may slow in technological iteration or become unsustainable due to persistent population shrinkage. These industries have very long value chains and require large numbers of engineers and a huge market to support them.

Although China's upward momentum in military technology relative to the West will likely continue for decades, if the relative decline in China's population cannot be reversed, China's overall national strength and international influence, including military power, will significantly decline.

The evolution of international relations is highly path-dependent. Western countries will not simply abandon their containment strategies because China has become weaker. Other countries will choose sides based on their expectations, and currently restrained hostile forces may seize opportunities to counterattack, potentially leading to severe geopolitical and security challenges for China.

Artificial intelligence (AI) is expected to replace many jobs, but its development highly depends on rich application scenarios, excellent talent, and strong financial resources, all of which require a massive population base. Population shrinkage will severely slow China's iteration speed in this field, gradually causing China to lose its advantage in AI.

If Peking University and Tsinghua University — the top 2 universities in China — do not reduce enrollment, it will become easier for young people to gain admission in the future. However, with a drastically reduced population base for selection, the fundamental quality of their students may only be at the level of current second-tier universities. Their research standards, due to diminished financial resources and overall national strength, will likely not hold a higher relative international position than current domestic second-tier universities.

II. Four possible futures for China's development

More critically, as long as the fertility rate remains below the replacement level, the population will continue to shrink until it reaches zero. Therefore, raising the fertility rate to the replacement level is an inevitable necessity. China's future living standards and overall national strength highly depend on when the fertility rate can be restored to replacement level or above.

Assuming that Chinese society remains basically stable and that deep reforms are carried out in areas such as income distribution, the household registration system, and land policy, we can, under that premise, discuss four scenarios based on when fertility returns to replacement level.

Scenario I: If fertility is only restored to replacement level in 80–120 years, China's population will stabilize at about 100-300 million. By then the country would be marginalized and face high security risks. Its technological and social development would be slightly above the world average, but clearly below its current relative position.

Scenario II: If fertility returns to replacement level in 40–80 years, the population would stabilize at about 300-600 million. China could barely maintain the status of a regional major power. Its technological and social development would be above the world average, broadly similar to its current relative position, but its overall national strength would be far weaker than it is today.

Scenario III: If fertility recovers to replacement level within 15-40 years, the population would stabilize at around 600-900 million. China could remain one of the major poles of global power. Its technological and social development would stand slightly above its current relative position, and its overall national strength would be close to today's level.

Scenario IV: If fertility returns to replacement level or above in 5-15 years, the population would stabilize at about 900 million to 1.5 billion. China would then be a leading world power, with overwhelming advantages in technology, social development, and affluence.

Our estimates suggest that under these four scenarios, China's GDP in purchasing power parity (PPP) terms would be in the ratio of roughly 1:1.2:1.6:2. In other words, per capita PPP GDP in Scenario IV would be about twice that in Scenario I, while the total PPP GDP could be 12-15 times larger. Over the long run, the outcomes linked to different fertility paths would be worlds apart.

Under current trends, the future prospects are worse than the worst-case Scenario 1, as current fertility encouragement efforts are insufficient to maintain the existing fertility rate, let alone raise it to the replacement level.

In Scenario IV, China's international competitiveness in high-end technology would be far stronger than in Scenario I. Products and services in these high-tech sectors make up a larger share of global trade than they do of real output, so differences in efficiency across countries in these sectors play a particularly big role in determining exchange rates. This is one reason why nominal wages for the same simple service, such as a haircut, are much higher in developed countries than in developing ones.

Moreover, the much stronger international position China would enjoy in Scenario IV compared with Scenario I would further strengthen its currency.

Taking these exchange rate effects into account, nominal per capita GDP in Scenario IV would likely be 3-4 times that of Scenario I, a larger gap than in PPP terms. In terms of total nominal GDP, Scenario IV would be 20-40 times higher than Scenario I. Put differently, restoring fertility to replacement level within 5-15 years, rather than in 80-120 years, would create an overall national strength gap of several dozen times.

The long-term population figures in these four scenarios are calculated from today's actual population and different timeframes for reaching replacement level. Specifically, it is assumed that fertility rises gradually and linearly to replacement level, while life expectancy, average age at childbirth, and the sex ratio at birth stay roughly at current levels.

The comparison of China's per capita GDP across scenarios and relative to global countries is estimated based on an analytical framework examining the relationship between development level and population scale effects. Despite short-term uncertainties, the relationship between economic development and population trends is fundamental. Given future population trends and absence of major disruptions, long-term economic performance is relatively clear. The population scale effect, weighted by spatial and temporal connectedness and including both internal and external population scale effects, is a foundational factor for the level of economic development.

This framework helps to explain a range of seemingly unrelated phenomena in development and allows for quantitative estimation of corresponding effects:

(1) Why modern Europe and the U.S. were more developed than more populous China and India;
(2) Why the U.S. is more developed than Europe today;
(3) How openness and education greatly promote development;
(4) Why some small countries can be highly developed;
(5) Why large cities within the same country are generally more developed than small cities;
(6) Why China has made rapid progress in defense technology and new energy but faces greater difficulties catching up in the chip industry.

The core conclusion from this framework is that a country's own population size is a fundamental positive factor in its economic development. Of course, natural resources are crucial for national security, but their value accounts for less than 5% of economic output, far below the value created by the country's population scale.

In 2015, James Jianzhang Liang梁建章 and I published an article titled "Justin Yifu Lin May Have Overestimated China's Economic Growth," predicting that China's growth rate in the following years would be 5.5%-6.9%, rather than the 7%-8% forecast by Professor Lin. From 2016 to 2023, China's annual growth rates were 6.8%, 6.9%, 6.7%, 6.0%, 2.2%, 8.1%, 3.0%, and 5.2%, respectively. Without the impact of the COVID-19 pandemic, the actual growth rates would have fallen entirely within our predicted range. The relative accuracy of our forecast stems from explicitly and systematically incorporating demographic trends as a fundamental driver of economic performance.

Different timelines for restoring fertility to replacement level will shape expectations about future development and confidence in that future. These expectations then feed directly into today's economic performance, fiscal health, living standards, other countries' positions on China, and even domestic political stability. Therefore, restoring fertility to a sustainable replacement level as soon as possible is not only a blessing for future generations; it also has profound, immediate significance.

In our view, as long as the government demonstrates firm determination to raise fertility — for example, by announcing a vision of gradually increasing annual births to 15–20 million within 15 years — economic expectations and confidence would recover quickly, and performance would soon move into an upward trajectory.

III. Raising the Fertility Rate is Achievable Through Effort

Bringing fertility back to a sustainable replacement level is like rowing upstream, but it is entirely achievable. In practice, it depends almost entirely on the strength of fertility incentives.

Most notably, Israel’s fertility rate reached 2.98 in 2021, with the Orthodox Jewish sector having a fertility rate as high as 6, while the true miracle is that secular Jews in Israel also have a fertility rate of 2.3, above the replacement level.

By comparison, fertility in the United States, France, and the Nordic countries is around 1.7-1.8, far higher than in East Asia, and this is not primarily due to immigration. In Russia and Japan, fertility had been rising slowly for some years but has recently declined again.

In Europe, countries that spend an additional 1 percentage point of GDP on family and child-related benefits tend to have about 0.1 higher fertility. Pro-birth policies do work; the question is how much a country is willing to invest. If restoring fertility to replacement level requires 100% of effort, China is currently not even putting in 3%.

We propose a simple, direct indicator for capturing demographic trends and evaluating population policies: "expected population." This refers to the size of the total population when those born in the current year reach their life expectancy, assuming that fertility, average age at childbirth, life expectancy, and net migration all remain at this year's levels.

"Expected population" has a clear meaning but is based only on a straightforward extrapolation from current data. It does not require any assumptions about future parameters, unlike population projections, and thus avoids being misled by overly optimistic or pessimistic scenarios. We have calculated expected population figures for all countries and major international groupings.

In 2021, China's actual population was 1.42 billion, still the largest in the world and more than the combined population of all OECD countries. Its expected population, however, was only 385 million, ranking seventh globally, less than one-third that of the OECD and even smaller than that of the Five Eyes alliance.

Because expected population is calculated only from a single year's data, it can fluctuate significantly from year to year. For example, from 2021 to 2022, China's "expected population" fell from 385 million to 315 million. "Expected population" can be used to monitor whether demographic trends are moving closer to or further from a target. If China aims to keep its population above 1 billion in the long run, then expected population should move closer to 1 billion year by year. The fact that it has fallen from 385 million — already far below that target — to 315 million shows that China is moving in the opposite direction.

Today's low fertility is essentially a problem of misaligned incentives: families bear the costs of raising children, but society as a whole reaps the benefits. Some existing pronatalist policies struggle to work for this reason. For example, extending maternity leave shifts costs onto employers, who do not directly benefit when employees have more children. Local governments likewise lack the incentive and the financial capacity to promote fertility, because children take around 20 years to grow up and may then move away to contribute elsewhere.

Yet the beneficiaries of higher fertility are society as a whole and the country's future. This means that the principal actor in fertility incentives should be the national government, taking a long-term view. In this regard, China has unique advantages. Culturally, it is a civilization that reveres ancestors and cares deeply about long-term, collective interests. Institutionally, it has a strong central government with powerful administrative capacity.

We therefore advocate establishing a high-level body led directly by top state leaders to coordinate fertility promotion. The existing family-planning bureaucracy and population associations have long operated within a mindset and policy framework centered on limiting births. Because of this entrenched inertia, they should, in terms of organization and personnel, be excluded from the new body.

The key to raising fertility is to make childrearing a paid form of work and to ensure that the income families receive for raising children is stable and predictable. We propose a national-level Population Fund that would systematically and routinely provide childrearing subsidies to households across the country, with local funds offering additional support where conditions permit.

Benefits could start small and be raised step-by-step until fertility returns to replacement level. The goal should be to gradually raise expected population and stabilize it at above 1.4 billion.

The Population Fund could draw its resources from at least three channels.

First, population bonds. The central government could issue special sovereign bonds and inject the proceeds into the Population Fund, which would then earn returns from the extra economic growth generated by additional births and use those returns to pay off principal and interest.

China's public debt as a share of GDP is far below that of other major economies, leaving ample room for such bonds. In principle, treasury bonds is a way for future governments to borrow from future markets, not for today to borrow from tomorrow. At present, China suffers from excess capacity in physical capital but a fragile capacity for human reproduction. Population bonds would be a way for the state to invest directly in future population, rebalancing the allocation of resources between people and physical capital.

Second, credit expansion. Injecting funds into the Population Fund via credit expansion would effectively anchor a portion of money issuance to the country's own population, the fundamental base of the real economy. This is more reasonable than anchoring money to foreign exchange reserves or commodity prices.

Credit expansion is particularly necessary during economic downturns. In fact, reserve requirement ratio cuts, interest rate reductions, and excessive infrastructure construction are forms of credit expansion, resulting in increased capacity or asset price inflation, with limited trickle-down to ordinary people.

Channeling expanded credit to rearing families through the population fund directly benefits the public. Inflation occurs when supply fails to keep up with effective demand. As a major producer, China sees much of the demand generated by family rearing income going to industries facing demand shrinkage, limiting inflationary pressure.

Third, a "starting income." Using digital currency, a certain share of the value added in all transactions could be distributed in real time to all citizens. The distribution ratio would be linked to labor market wages to safeguard employment stability: if wages are rising across the board, it signals a labor shortage and the distribution ratio should be reduced; if wages are falling, the ratio should be increased.

This is my conceived framework for a universal starting income embedded with labor market feedback mechanisms, maintaining a pro-work incentive on a universal basis. Tilting the distribution amount toward children can help raise the fertility rate, with the portion allocated to children nominally recorded as implemented through the population fund.

The essence of the above three channels is to reallocate more of the current economic output to rearing families, i.e., having society share part of the child-rearing costs. This is fair and reasonable, as rearing families invest time, energy, and resources in raising children, who later support the entire economy through consumption and work, and directly contribute to society through taxes, etc.

In the primary distribution of economic output, due to the Matthew effect where the strong get stronger, income and wealth concentrate toward a minority, eventually triggering sharp social conflicts and even regime changes. This continuous wealth concentration and rigid resetting were the main theme of dynastic cycles in agricultural eras and the political evolution of many countries in the industrial era.

The spread of the internet and transportation convenience accelerate the Matthew effect; previously, businesses could survive by being the best locally, but now they must be top-ranked globally to survive. If an increasing proportion of value-added in the economic cycle is captured by leading enterprises, wealth trickle-down becomes more difficult. This is why China's technological progress and efficiency improvements are rapid, yet social involution intensifies, making the middle class feel increasingly hard-pressed.

In the foreseeable future, AI may replace many repetitive and even creative jobs, with the emergence of general artificial intelligence typified by large language models heralding this prospect. This should be a boon for humanity, allowing less human input for greater output. However, under the current economic system, lacking work means losing income or significant income reduction. In the past, many jobs were replaced by machines, causing short-term unemployment waves, but overall, new job creation outpaced machine replacement, leading to fuller employment.

However, with AI advancement potentially outstripping new job creation, more people may lose jobs and income, being squeezed out of the economic cycle. They would lack suitable labor skills and consumption capacity, becoming economically ineffective populations.

If technological progress makes it impossible for humans to sustain reproduction or even survival, it indicates that modern society's valuation of human worth is outdated. From the perspective of human civilization, survival and reproduction are the ends, and material production is the means. In eras of material scarcity where production barely meets consumption, material production appears more important than child-rearing in value systems. However, the main issue in moderately to highly developed economies is not material shortage but society's inability to sustain normal reproduction.

To fundamentally solve this problem, it is necessary to recognize that material production is not the ultimate purpose of life but a necessary cost to meet consumption needs. Even from a purely economic perspective, human value lies not only in labor but also in consumption power and the population base that produces outstanding talents.

A distribution system that concentrates income too heavily at the top suppresses demand and hampers development. If most income accrues to a tiny elite, the sectors that thrive will be those supplying luxury goods with limited demand, while industries that meet the daily needs of the majority will stagnate and be pushed toward low-quality, low-price segments.

This Latin American-style economic model triggers sharp social conflicts and exacerbates insecurity among the wealthy, and can even spark an exodus of capital and people.

By contrast, if income and wealth are less concentrated, affluent families can enjoy much the same quality of life, while ordinary households can still afford high-quality housing, cars, smartphones, and so on. This is highly conducive to technological progress and productivity gains and gives the wealthy greater peace of mind.

Therefore, reallocating more economic output to rearing families through the population fund can stimulate previously absent demand-supply matching, thereby enlarging the economic pie. This is the most direct way to let people share development fruits and achieve common prosperity, as well as the best investment in the future and a feasible path to ensure the perpetual continuity of the Chinese nation. Providing universal assistance for each child also reflects that the people are equal masters of the country, conducive to fostering a sense of community.

China currently invests about 58 trillion yuan a year in fixed assets, much of it in projects that yield little return: underutilized industrial parks, bridges and highways in sparsely populated areas, and countless deserted artificial attractions. If only one-fifteenth of that 58 trillion yuan were directed instead to families raising children, that would be 3.8 trillion yuan — about 3.2% of GDP — used to support households. This is roughly comparable to the effort made by European countries to encourage fertility.

Assuming China has 20 million annual births, these funds would be sufficient to provide 1,000 yuan per month per child aged 0-16, meaning a three-child family could receive 3,000 yuan in child-rearing income, roughly equivalent to current incomes of young people in the Chinese mainland today.

If the birth population can gradually restore to 20 million annually, overall expectations for China's development would improve, and many current problems could be resolved.

Ultimately, living standards depend on productivity — that is, how efficiently labor is converted into output. Given China's enormous capacity to produce and build, its people should enjoy lives that match that capacity.

If a large share of output continues to be channelled into low-return investments and trade surpluses rather than to households who are bearing the burden of raising children, and if this ultimately forces young people to give up marriage and childbearing and become mere worker bees for the world, it would signify a failure in China's development model.

Treating child-rearing as a decently paid job is the way forward. In the short term, it would boost confidence, spur investment, and break the vicious cycle of economic downturn. Long-term, it would enhance economic growth and fertility rates, securing the future.

More importantly, it returns the economy to its fundamental purpose, enabling groups to continue and live better. The most crucial realization is that restoring the fertility rate to the replacement level is essential, and the sooner, the better. Population is destiny. How history judges China's place in the era will depend, to a great extent, on its actions regarding the population issue.