China is finally dropping its one-child policy for around one-third of the population: couples that are urban and Han Chinese in which one parent is an only child. (Couples that are rural, non-Han, or where both parents were only children were already allowed to have two kids.) The policy will remain in force only for urban Han parents who were both the product of two-child homes—a fairly small proportion.
China’s approximately 930-million-person labor force shrank last year for the first time in decades, and will decline further as a population bulge of people now in their 40s and 50s pass into retirement. A baby boom would help compensate, and—when the babies grow up—increase the number of people who can support that aging population. However, it may be too little too late, given that the labor force is estimated to begin declining by as much as 10 million a year starting in 2025. Any population rebound will take decades, and could be offset if families start averaging fewer than two children as they become wealthier and more urban.
More Consumer Spending—At Least on Baby Formula
Allowing more couples to have more children now should boost consumption almost right away for goods like infant formula, food and clothing, and education services. Shifting China’s export-driven economy further towards consumption-led growth is one of the government’s key economic goals.