China might relax its three-decades-old one-child policy

Nowadays, quite a number of economists, inside China and outside, are keen on making headlines by predicting when China's economy will overtake the United States, but they may simply ignore the demographic dynamics between the two countries.

From 2000 through to 2050, China, India and the US will be the three most populous countries in the world, which will largely define the geo-economy in the 21st century. Of the three countries, China's major challenge lies in its preparedness for an aging society and its ability to build an army of skilled workers.

China is getting older faster than it's getting richer compared with the US. According to a UN projection, by 2040, the proportion of elderly people in Chinese population will rise to 28%, which is higher than what it predicts for the United States. Also, in the long run, India's population structure will become better than China's in that in 15 years India will have a labor force that is both bigger and younger than China's.

China's internal dynamics will change too. If it fails to put in place an adequate system of old-age support by then, it will be unable to manage the demographic transition without widespread economic hardship - which will jeopardize President Hu Jintao's strategy of building up a "harmonious society".

"China needs to act soon and decisively," said Richard Jackson, the director of Washington, DC-based Global Aging Initiative at the Center for Strategic and International Studies.

China, along with India, has been the biggest exporter of talent for decades. Now China is sucking back the students studying and working overseas, mainly in the US and Europe. But repatriating overseas talent is not enough. China needs to enhance fundamentally the quality of its domestic labor force, half of whom are migrant workers from the countryside.

China's economic miracle can largely be attributed to the "demographic premium", meaning that a huge pool of low-cost labor has fueled an unprecedented manufacturing boom, while rising numbers of young, middle-class urban couples have spent generously on housing, automobiles, consumer goods and other products and services.

But the "premium" can't last long. In 15 years, China will move from having an "unlimited labor supply" to facing a shrinking labor army. Thus China has to start right away to build up a legion of skilled workers. In an aging society, sustaining high economic growth and maintaining high living standards hinge largely on high productivity, which is the derivative of quality human capital.

By now, nearly half of Chinese citizens were born under the one-child policy. But a discrepancy of this policy is that it gives certain leeway to farmers for them to give birth to more than one child. But in the countryside both the health-care and education systems are far poorer than in cities. The overwhelming majority of children born and raised in poor health and education systems in rural areas are creating a seriously flawed population structure.

While the government is giving priority to rebuilding and strengthening the health-care and education systems in rural areas by pouring in tens of billions of yuan, it remains a huge challenge to tackle the problem given the fact that the country's rural population amounts to about 80% of the more than 1.3 billion people in China.

The article quotes an official as saying "A major principle of the new policy would shift the emphasis from quantity control to focus on quality improvement". Does he mean eugenics?