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Breaking the “Fertility Paradox”


Cai Fang, a top Chinese economist, argues that China’s low fertility rate can be remedied with the right set of policy solutions. Cai recommends Beijing focus on policies that improve socio-economic development levels and promote gender equality, diagnosing these factors as key constraints on decisions around childbirth.

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Summary: The decline of fertility rates with the advancement of economic and social development levels is a phenomenon observed universally across countries. Concurrently observed is the fact that if fertility rates remain at a low level for an extended period, it leads to continuous deepening of population aging. This, in turn, weakens the potential for economic growth and slows down the pace of socio-economic development. Due to researchers’ insufficient understanding of the determinants behind fertility rate changes, interpreting this asymmetric, even antagonistic, causal relationship seems challenging, forming the so-called “fertility paradox.” By referencing international experiences and analyzing China’s unique population transition, this article attempts to argue that the extremely low fertility rate currently observed in China is not inevitable. Through more comprehensive socio-economic development or by improving the Human Development Index, especially by addressing factors constraining family development and expanding family resource allocation curves, we can anticipate a rebound in fertility rates to replacement levels (which are also the desired levels), thereby breaking the fertility paradox.


I.  Introduction


By at least the 1940s, the theory of demographic transition had taken shape, persuasively revealing the trends and mechanisms of changes in birth rates and growth rates. It was anticipated that fertility rates would decrease with economic development (Caldwell, 1976). However, from the 1950s to the 1970s, academic and public opinion circles remained unaffected by this perspective. There was a prevailing deep concern about the “population explosion” in developing countries, leading to a flurry of radical calls for population growth controls. Representatives of this trend either had not encountered the theory of demographic transition or refused to accept its conclusions about declining birth rates. Hence, they failed to foresee that fertility rates would continually drop in both developed and developing countries after that time. Meanwhile, as a comprehensive indicator of economic development, the per capita GDP in both categories of countries saw a significant rise.

至少在20世纪40年代,人口转变理论便已经成型,富有说服力地揭示了人口出生率和增长率变化的趋势和机理,预期人口生育率将随着经济发展而降低(Caldwell, 1976)。然而,20世纪50年代到70年代的学术界和舆论界并未受其影响,仍然产生了对发展中国家“人口爆炸”的强烈担忧,并集中出现了一系列要求对人口增长采取控制手段的激进主张,一时间此类成果可谓汗牛充栋。这种思潮的代表性人物或者尚未接触到人口转变理论,或者不愿意接受其生育率下降的结论,因而也未能预见到自那之后,无论在发达国家还是在发展中国家,生育率均先后经历了持续的下降;与此同时,作为经济发展综合性指标的人均国内生产总值,在这两类国家都经历了大幅度的提高。

With the overall growth of the global economy and shifts in regional structures, economists, based on new empirical evidence, began to abandon various paradigms regarding the relationship between population and economic growth. Notably, they uncovered the significant contribution of the demographic dividend to economic growth. For instance, starting in the 1990s, economists, represented by some professors from Harvard University, conducted pioneering work in theoretical explanation and empirical verification. They discovered the significant contribution of the dependency ratio in economic growth, especially noting that this demographic factor played a crucial role in latecomer countries trying to catch up with the forerunners. This insight gave rise to the renowned demographic dividend school of thought. Some Chinese scholars also adopted this paradigm, finding through empirical studies that the demographic dividend displayed powerful explanatory prowess for the rapid growth during China’s reform and opening-up period.


For developing or catching-up countries, the demographic dividend theory remains the most compelling and relevant population economics doctrine, providing a beneficial research paradigm for scholars. However, like any economic theory with explanatory power for specific periods or issues, it cannot universally address all matters at all times. We should not expect the demographic dividend theory to be a panacea unlocking the enigma of the relationship between population and the economy. In reality, due to the inherent limitations of the theory, when facing new challenges emerging in the new stages of demographic transition, it reveals certain inadequacies both in theoretical explanation and policy recommendation. This article will briefly outline such limitations of the demographic dividend theory to foster a more open-minded approach, drawing from various complementary analytical frameworks and tools. By integrating historical, theoretical, and practical logic, we aim to gain a more comprehensive understanding of the relationship between the population and the economy, subsequently proposing beneficial and effective policy recommendations.


First, there is a lack of a strong connection between the demographic dividend research paradigm and mainstream growth theories, inevitably reducing its breadth and depth in understanding the relationship between population and growth. This limitation in research is evident in the selection of variables that directly impact economic growth due to population factors. For instance, most studies use the population dependency ratio as a proxy for the demographic dividend and incorporate it into economic growth models to observe its significance and magnitude. As a result, the demographic dividend research confines its analytical scope, failing to recognize variables beyond the dependency ratio. Many traditional variables used in growth accounting and growth regressions are, in fact, related to population factors.


In reality, demographic changes, especially shifts in age structures, not only influence labor supply but also impact the rate of improvement in human capital, savings rates, returns on capital, and the efficiency of resource reallocation, which subsequently affects labor productivity and total factor productivity (Cai, 2019). Due to a lack of alignment with neoclassical growth theory, this paradigm missed the opportunity to revolutionize or significantly modify the former, leading the demographic dividend theory to remain relatively marginal in growth theories.

实际上,人口变化特别是年龄结构的变化不仅影响劳动力供给,还影响人力资本改善速度、储蓄率和资本回报率、资源重新配置效率进而影响劳动生产率和全要素生产率等(Cai, 2019)。由于未能在与新古典增长理论逻辑进行衔接的基础上充分理解进而解释清楚人口红利,这种理论范式便失去对前者进行颠覆性修正或革命性发展的良好机会,使人口红利理论在增长理论中始终处于相对边缘的地位。

Second, the demographic dividend research paradigm solely focuses on the supply-side effects of population factors on economic growth, neglecting demand-side effects. Indeed, for a long time, economic development patterns witnessed in many countries and regions were largely driven by harnessing the demographic dividend from the supply side, leading to extraordinarily high growth rates. Thus, theories and empirical studies in this field either validate the experience of the demographic dividend boosting potential growth or highlight the fact that growth rates will decline once the demographic dividend disappears.


However, with the global aging of the population and some developed economies entering an era of negative population growth, the impact of demographic factors is now more pronounced on the demand side. Whether it is pioneer countries in demographic transition, like Japan, or the trend already evident in China as a follower, both indicate that in the two crucial turning points of demographic change, the first—the peak of the working-age population—mainly affects economic growth from the supply side. In contrast, the second turning point, the peak of the total population, has a more pronounced impact on the demand side of economic growth. If the factors on the demand side can be integrated into the logic of the demographic dividend theory, the theory’s relevance and explanatory power regarding reality can be significantly enhanced. On the one hand, it can find common ground with the mainstream proposition of long-term stagnation. On the other hand, it can make a unique contribution to the study of this proposition, further refining and enriching its theoretical framework.


Furthermore, the demographic dividend research paradigm tends to eternalize the demographic dividend. Given that the dependency ratio is used as a quantitative indicator of the demographic dividend, according to the logic and process of demographic transition, this factor will eventually reverse in a direction unfavorable to economic growth. Hence, prominent authors in this field proposed the concept of a second demographic dividend, deviating from the previous logical trajectory. They mainly discuss the second demographic dividend from the perspective of maintaining savings levels, believing that a population consisting more of older workers and elderly will have a strong savings motivation, thus sustaining economic growth. In their view, as the effect of the first demographic dividend wanes, the second demographic dividend will emerge and persist forever. However, this so-called second demographic dividend theory has flaws in both methodology and relevance to reality. On the one hand, the source of their proposed second demographic dividend does not come from favorable demographic factors, which weakens the demographic dividend theory itself. On the other hand, the significant challenge brought by aging is not insufficient savings but excessive savings, a primary feature of long-term stagnation. Thus, this so-called second demographic dividend is not genuinely a “dividend” to be reaped.


Last, the demographic dividend research paradigm has not devoted enough passion and resources to the topic of how to stimulate fertility rates to bounce back to replacement levels. Given that the theoretical framework itself is based on unidirectional changes in fertility rates, expecting breakthroughs in research on increasing fertility might be unrealistic. However, this creates a theoretical dilemma known as the “fertility paradox,” which researchers ultimately need to address. This article examines the paradox on three levels: First, while economic and social development lead to reduced fertility rates, once they decrease to a certain extent, they hinder economic and social progress. Second, similar to the above logic, although fertility rates can be viewed as a function of economic and social development indicators, when considering dynamic time changes and other exogenous factors, it is impossible to conclude that economic and social growth is the inverse function of fertility rates. Third, the relationship between fertility rates and economic and social development is neither linear nor unlimited. In fact, although many countries have total fertility rates breaking through the 2.1 replacement level, situations with a total fertility rate below 1 are rare. From these perspectives, the so-called fertility paradox reflects people’s understanding at a particular stage, or it poses an unresolved proposition, hoping to gain more attention from researchers.


While this proposition involves a general phenomenon common to many countries, this article focuses more on exploring the specificity of China’s experience and targeted solutions from general rules. Although, in the end, it is the different stages of declining fertility rates that determine the emergence and disappearance of the demographic dividend, the demographic transition in different countries still has its unique characteristics and differences. For example, the decline in China’s fertility rate is both a result of the general trend where economic and social development acts as a basic driving force, and is also uniquely influenced by the strictly enforced one-child policy. Therefore, the current extremely low total fertility rate might contain historical influences where fertility desires were suppressed. Hence, exploring the potential for a rebound in fertility rates is warranted, both from a general standpoint and considering China’s unique context.


Moreover, in academia, there is a research tendency to dismiss studies that suggest a negative impact of population aging on economic growth. These dismissals typically employ the following signature argument methods: 1. In response to the fact that the working-age population is declining, they usually point out that the overall scale of the working-age population remains large, thereby denying the adverse effects of the weakening or disappearance of the demographic dividend. 2. With regards to the expectation that the population will peak and then enter negative growth, they often argue that the overall scale of the population will still be large enough, negating any warning of adverse effects. 3. In the face of labor shortages and weakening comparative advantages, they often suggest that enhancing human capital can improve the quality of workers, thus compensating for the shortage in numbers. For example, a recent study concluded that a low fertility rate would not hinder China’s economic growth. The basic argument is that, even with aging, economic growth can still be promoted by improving human capital, labor participation rate, and productivity. The policy implication is that China should not focus on seeking to increase fertility. Such studies, due to their methodological flaws, inevitably lead to misunderstandings of other research conclusions, which could potentially mislead with their findings.


First, when highlighting negative trends like the disappearance of the demographic dividend, a basic methodological premise assumes that other conditions remain unchanged, and solely because of population structure changes, economic growth suffers a blow. Aging is undoubtedly linked to labor shortages, but it does not necessarily correspond to accelerated improvements in human capital, labor participation rate, and productivity. Pointing out the challenges of the disappearing demographic dividend merely highlights the factors that once drove rapid economic growth are weakening or have been lost. It also emphasizes the need to explore other more sustainable sources of growth.


Second, indeed, under the conditions of a disappearing demographic dividend, many other economic growth factors also reverse. Macroeconomically, the economy can no longer maintain its past growth rate. For instance, with the reduction of new labor entering the workforce, the speed at which human capital among existing workers improves significantly slows. The proportion of the older population and older workers naturally tends to lower the labor participation rate. With the weakening and loss of traditional comparative advantages, it becomes easy for low-productivity enterprises to stay in business, leading to resource allocation rigidity. A premature reduction in manufacturing weight, coupled with too rapid and premature a shift of the labor force to lower productivity services, causes resource allocation degeneration, making productivity improvements more challenging (Cai Fang, 2021b).


Last, while China’s economic future should not solely rely on increasing fertility rates, boosting fertility rates does not hinder human capital accumulation, labor participation rate improvements, or productivity enhancements. In fact, policies aiming to increase fertility align with these objectives, a point further explored and validated in this article.


Hence, this article will both highlight the long-term challenges brought about by China’s low fertility rate and discuss the possibility of boosting fertility rates through reforms and policy adjustments. In the second section, this article will discuss the conditions under which a declining fertility trend could rebound or rise again, looking at general trends and international experiences. International experiences show these conditions prominently manifest when gender equality gains more attention at high human development levels. The third section, using international experience, will discuss China’s challenges and urgency in entering a deeper stage of aging, transitioning from an aging society to an aged society. The fourth section will argue that an extremely low fertility rate is not China’s fate. By analyzing the constraints on family development, we reveal opportunities to tap into fertility potential. The fifth section will provide a summary of this article’s conclusions and discuss their policy implications.


II. Can the birth rate only decrease linearly and monotonically?


With the increase in per capita income, the continuous decline in the fertility rate has become a widely observed fact. In Figure 1, based on World Bank data and definitions, countries are divided into two categories: high-income countries and low to middle-income countries. The relationship between per capita income and total fertility rate (TFR) is shown. Figure 1 presents the change in the per capita GDP index and TFR index with 1960 as the base year. Here, the per capita GDP is calculated in constant 2015 U.S. dollars, and the TFR refers to the average number of children a woman will give birth to in her lifetime. It can be seen from Figure 1 that since 1960, as per capita GDP continued to grow in high-income countries, TFR continued to decrease; in low and middle-income countries, as the per capita GDP caught up, TFR also began to decline from the mid-1960s and did so at a more noticeable rate.


Figure 1. The global increase in per capita income and decline in fertility rates Source: World Bank Database, https://data.worldbank.org.
图1  世界范围人均收入提高与生育率下降 资料来源:世界银行数据库,https://data.world bank.org/。

Furthermore, based on the World Bank’s classification, countries can be grouped into high-income, upper-middle-income, lower-middle-income, and low-income categories. The changes in per capita income and fertility rate within these groups are observed. In 1960, high-income countries had an average per capita GDP of $11,518 and a TFR of 3.03. Later, by 1975, the fertility rate dropped below the replacement level of 2.10, with a per capita GDP of $19,006. By 2019, the average per capita GDP for this group reached $43,001, with a TFR reduced to 1.57. The TFR for upper-middle-income countries started to decline from a base of 5.53 in 1965, when the average per capita GDP was $1,326. By 1994, when the per capita GDP reached $2,990, the TFR dropped below the replacement level. In 2019, the per capita GDP was $9,527, with a TFR of 1.83. The TFR for lower-middle-income countries began to decline from a base of 5.98 in 1962 when the average per capita GDP was just $626. By 2019, with a per capita GDP of $2,365, the TFR was 2.69, still above the replacement level. The TFR for low-income countries began to decline from a base of 6.75 in 1972. The World Bank database does not have the average per capita GDP data for these countries for that year. In 2019, the per capita GDP for low-income countries was $745, with a TFR of 4.57, which is significantly higher than the replacement level.


It is generally believed that since the 1950s, the global economy has entered an era of convergence (Spence, 2011). Since the 1990s, with the onset of a new wave of economic globalization, the world’s economy has also shown obvious convergence. In other words, developing countries achieved a faster per capita GDP growth rate than developed countries (Cai Fang, 2019). Another perspective on this development fact is that the rate of decline in fertility in developing countries is significantly faster than in developed countries. The universal decline in global fertility rates will inevitably lead to global population aging. According to the revised 2019 population data provided by the United Nations, the proportion of the world’s population aged 65 and over (i.e., the aging rate) increased from 4.97% in 1960 to 9.32% in 2020. Furthermore, the average aging rate of all four income group countries has increased. Among them, high-income and upper-middle-income countries have the highest degree of aging, reaching 18.6% and 11.1% in 2020, respectively (UNDESA, 2019).

一般认为,20世纪50年代以后世界经济进入一个大趋同的时代(Spence, 2011),90年代之后在经济全球化进入新一轮高潮期间,世界经济也呈现出明显的趋同。也就是说,发展中国家总体上实现了比发达国家更快的人均GDP增长(蔡昉,2019)。这个发展事实的另一个角度,则是发展中国家生育率的下降速度也显著快于发达国家。全世界生育率的普遍下降,最终必然导致全球人口的老龄化。根据联合国提供的2019年修订版人口数据,全世界65岁及以上人口占比(即老龄化率)从1960年的4.97%提高到了2020年的9.32%。而且,所有四个收入组国家的平均老龄化率都提高了,其中,高收入国家和中等偏上收入国家老龄化程度最高,2020年分别达到18.6%和11.1%(UNDESA, 2019)。

Although there are still significant differences among countries, the adverse effects of population trends on economic growth have received widespread attention and have become an essential research topic in academia. Related research includes discussions in two directions: first, since the population transition is ultimately a regular and inevitable trend, there is a need to study how to address the long-term stagnation of economic growth in the context of aging, especially how to deal with the characteristics of the new normal in the world economy, such as low inflation, low long-term interest rates, and low economic growth rates. Second, the continuous decline in fertility may not necessarily be a universal fate. At least for some countries, there is still an opportunity to slow down the rapid decline in fertility and even to achieve a rebound in fertility to some extent and for some time.


From an economic perspective, when discussing how to eliminate the obstructive effects of population changes on economic growth, it is also necessary to look at the inherent patterns of population changes and see what potential can be tapped to encourage the fertility rate to rebound to replacement levels. To reverse population aging, we ultimately need the fertility rate to return to above replacement levels. This seems like an “impossible task.” Perhaps some might think that serious researchers and policymakers who face reality should not set themselves the goal of returning to replacement-level fertility. So, what should be the realistic target for fertility rates? We can look at the current state of fertility rates worldwide, the gap between this status quo and potential fertility intentions, and the relevant determining factors.


The United Nations Department of Economic and Social Affairs’ Population Division found from many surveys that regardless of whether the current fertility rate is high or low, households in all countries tend to express a fertility preference of about two children. That is, in the absence of particular constraints, the desired fertility rate is generally consistent with the replacement-level fertility rate. Figure 2, which shows the relationship between the actual TFR of countries and the replacement-level TFR, can be combined to see which factors promote or constrain the actual fertility rate’s convergence to the preference level for countries with high and low fertility rates.


Figure 2.    The total fertility rate of countries and the gap with the replacement level Source: World Bank Database, https://data.worldbank.org/indicator/SP.DYN.TFRT.IN; UNDESA (2019).
图2  各国总和生育率及与更替水平的差距 资料来源:世界银行数据库,https://data.world bank.org/indicator/ SP.DYN.TFRT.IN;UNDESA(2019)

Countries that currently have high fertility rates have largely experienced a gradual decline in fertility. This corresponds with the rapid economic growth and significant poverty reduction in developing countries. This can be directly observed through cross-national data. Additionally, based on data from the World Bank, this article compares the “desired fertility rate” and the actual fertility rate of dozens of low and middle-income countries. The simple average of these two fertility rates in these countries are 3.26 and 3.78, respectively. This means that if unwanted births could be prevented, the average number of children born in these countries and regions could be reduced by 0.52, or a 13.7% reduction in fertility rate. Furthermore, the poorer the country, the greater the disparity between the desired and actual number of children. For example, in the least developed countries, as defined by the United Nations, the desired fertility rate is 3.41, while the actual fertility rate is 4.06. A study based on population trends in 195 countries and regions indicates that the long-term decline in fertility rates in such countries is largely attributed to the increased level of women’s education and the availability of contraceptives, accounting for 80%.


Research shows that for countries with low fertility rates, addressing or eliminating factors hindering childbirth, such as promoting gender equality, empowering women, and improving reproductive health services, can potentially lead to a moderate rebound in fertility rates (UNDESA, 2019). In particular, studies have shown that indicators of human development, including GDP per capita, education levels, and life expectancy, not only contribute to decreasing fertility rates over a certain period but may also be conditions for a rebound at higher levels. Using long-term data from over 100 countries, researchers have found that if high human development levels are achieved and gender equality is ensured, fertility rates among women in their later reproductive years will increase. In other words, without gender equality, general improvements in human development are not enough to boost fertility rates. The conclusion is that a balance between work and family life is essential to increase fertility rates.

研究表明,对于那些低生育率国家来说,如果能够处理好或者消除阻碍生育的因素,如促进性别平等和妇女赋权以及提高生育健康服务等,生育率依然可望实现适度反弹(UNDESA, 2019)。特别是有研究表明,包括人均GDP、受教育水平、预期寿命等生活质量内容在内的人类发展水平,既是一定时期内生育率下降的诱因,也可能在更高水平下成为生育率反弹的条件。这些作者利用100多个国家的长期数据揭示,如果在实现很高的人类发展水平的同时,还能够满足性别平等这个条件,女性在其生殖年龄稍晚时期的生育率会得到提高。也就是说,不具备性别平等这个条件的话,仅有人类发展水平的一般性提高,也不足以促使生育率出现反弹。由此得出的结论是,提高生育率需要处理好工作和家庭的平衡关系。

III.  Transition from an Aging Society to an Aged Society


Defining aging on an international comparative scale, or differentiating the degree of aging, requires quantitative descriptions. In a 1956 report, the United Nations first defined populations from an age perspective, categorizing populations with an aging rate below 4% as “young,” between 4% and 7% as “mature,” and above 7% as “aged” (UNDESA, 1956). Later, it is generally believed that the World Health Organization further delineated aging degrees: countries or regions with an aging rate over 7% are defined as an “aging society,” over 14% as an “aged society,” and over 21% as a “super-aged society” (cited from Okamura, 2016).

在国际比较的层面上定义老龄化也好,区分老龄化的程度也好,都需要一些定量性的描述。联合国在1956年的一份报告中,第一次从年龄构成的角度界定人口类型,把老龄化率在4%以下的人口称为“年轻型”(young),4%~7%之间为“成熟型”(mature),7%以上为“老龄型”(aged)(UNDESA, 1956)。后来,一般认为世界卫生组织进一步对老龄化做出了程度上的划分,即老龄化率超过7%的国家或地区被定义为“老龄化社会”(aging society),老龄化率超过14%为“老龄社会”(aged society),老龄化率超过21%便是进入了“极度老龄社会”(super-aged society)(转引自Okamura, 2016)。

China’s aging rate reached 7.0% in 2000, marking its entry into an aging society. Since then, aging has become the main theme of China’s population changes. The seventh census data shows that China’s aging rate reached 13.5% in 2020. Based on the average aging rate over the past 20 years, China’s aging rate exceeded 14% in 2021, indicating its entry into an aged society. Any data adjustments that might slightly delay this milestone will not change the overall judgment that China has entered an aged society. What needs to be discussed is the economic impact of China’s transition from an aging society to an aged society, how it differs from the impacts observed to date, and its significance.


After becoming an aging society in 2000, China’s aging speed was relatively moderate until 2010, and it still enjoyed a demographic dividend for a while. Only after the working-age population peaked in 2010 did the pace of aging accelerate. Between 2010 and 2020, the primary challenge for China’s economic growth came from the supply side. The negative growth of the working-age population led to reversals in the supply and allocation of production factors, causing a significant and persistent decline in the potential growth rate. During this period, the actual growth rate was consistent with the potential growth rate, meaning there was no demand-side shock constraining economic growth (Cai, 2021). However, once China enters an aged society, it will face new and severe demand-side challenges.

应该说,自2000年进入老龄化社会后,中国的老龄化速度在2010年之前相对平缓,仍然享受了一段时间的人口红利。只是在2010年劳动年龄人口达到峰值之后,老龄化速度才加速攀升。在2010—2020年间,中国经济面临的增长挑战主要来自供给侧,即伴随着劳动年龄人口负增长,生产要素供给和配置均发生逆转性变化,导致潜在增长率的显著且持续性下降。在这期间,实际增长率与潜在增长率是相符的,意味着没有出现制约经济增长的需求侧冲击现象(Cai, 2021)。然而,一旦中国进入老龄社会,则将面临崭新且严峻的需求侧挑战。

To better position China’s aging population and understand the reality and severity of new challenges, it is worthwhile to compare China’s experience with that of Japan (Figure 3). Japan entered an aging society with an aging rate of over 7% in the early 1970s and entered an aged society with an aging rate of over 14% twenty years later in the early 1990s. In 1995, as Japan’s aging rate reached 14.3%, its working-age population also peaked. It was also from the 1990s that the Japanese economy entered its “lost decades.” Research indicates that from the 1990s to 2010, or during the “lost two decades,” the primary challenge for Japan’s economic growth was the vanishing demographic dividend, causing supply-side shocks. Only as Japan approached its population peak in 2010 (when the aging rate also reached 22.5%) and during the subsequent negative population growth did Japan’s economy face more apparent demand-side shocks, exhibiting characteristics of economic growth “long-term stagnation” or “Japanization” (Cai, 2021a).


Figure 3.    Total Population, Age Structure, and Aging of Japan Source: UNDESA (2019).
图3  日本总人口、年龄结构和老龄化 资料来源:UNDESA(2019)

Japanese economists once used four characteristics to describe the phenomenon of economic “Japanization,” or the characteristic manifestations of Japan’s economic stagnation. They are: 1. The actual growth rate is consistently below the potential growth rate. 2. The natural real interest rate is below zero, and also lower than the actual real interest rate. 3. The nominal (policy) interest rate is zero. 4. There is deflation or a negative inflation rate (Ito, 2016). This is consistent with the summary made by other economists, especially the representative figure of this theory, Summers, when discussing how aging leads to long-term economic stagnation worldwide. The insight derived from this is, as Japan, once the world’s second-largest economy, demonstrated upon becoming a super-aged society, deepening aging and negative population growth pose a significant demand-side shock to a country’s economic growth. It manifests as the overall social demand becoming a routine constraint on economic growth, often resulting in an actual growth rate that is below the potential growth rate.

日本经济学家曾用四个特征来刻画经济“日本化”现象,或者说日本经济停滞的特征性表现,即:第一,实际增长率长期低于潜在增长率;第二,自然真实利率低于零,也低于实际真实利率;第三,名义(政策)利率为零;第四,通货紧缩或负通货膨胀率(Ito, 2016)。这与其他经济学家特别是这个理论的代表性人物萨默斯,在探讨老龄化导致世界经济长期停滞时所作的概括基本一致。由此得出的启示是,正如作为曾经的第二大经济体日本在率先进入极度老龄社会表现出的那样,老龄化加深和人口负增长,给一个国家的经济增长带来巨大的需求侧冲击,表现为社会总需求成为常态的经济增长制约因素,以致经常性地出现实际增长率低于潜在增长率的负增长缺口。

China’s total fertility rate had already dropped below the replacement level of 2.1 in 1992 and continued to decline thereafter. This means that, after experiencing the inertia of population growth for a shorter or longer time, China’s population will eventually peak. In fact, the natural population growth rate has continued to decrease significantly since reaching its peak of 16.61% in 1987, and by 2020, it had already dropped to 1.45%, just one step away from the population peak. The transition to an aging society and an era of negative population growth poses challenges to the Chinese economy. The challenges are not just from the disappearing demographic dividend causing enhanced supply-side shocks, but also from the intensifying combination of supply and demand-side shocks. Moreover, the constraints on demand are increasingly becoming the main challenges facing economic growth. Among the many tasks to cope with these overlapping shocks, promoting the fertility rate to return to the replacement and expected levels is undoubtedly a long-term task requiring historical patience. However, given that this task also aligns with the goal of promoting common prosperity and can improve people’s livelihoods and stimulate consumer demand, it should be undertaken as soon as possible and pursued vigorously.


IV. Breaking the Fate of China’s Extremely Low Fertility Rate


Based on the above analysis, the following hypothetical judgments can be made and further verified: 1. International experience has shown that under very high levels of human development and gender equality, fertility rates tend to converge from very low levels to the replacement level of 2.1. 2. Chinese families still have varying degrees of unmet fertility desires, so there is unique potential for the fertility rate to rebound from its current extremely low level. 3. By focusing on improving the level of basic public services and promoting gender equality, creating a more agreeable balance between career and “Three Nurtures” (childbirth, child-rearing, and child education) both socially and within families, China’s total fertility rate is expected to recover. Based on these hypotheses, this article uses Figure 4 to illustrate the trade-offs Chinese families make between career development and the “Three Nurtures.”


Figure 4.    The Balance between Family Career Development and the “Three Nurtures”
图4  家庭的职业发展与“三育”之间的取舍权衡

This article assumes the existence of an indifference curve Id, which corresponds to having 2.1 children. Every point on this curve meets the desired fertility level and the family’s career development goals, and it can be called the “Desired Family Development Indifference Curve.” To achieve the family utility on this combination, families need to have corresponding time and income. Here, this condition is expressed as the family resource budget line Bd and is called the “Desired Family Budget Line.” The tangent point between Bd and Id represents the ideal choice for family development that meets both career development and “Three Nurtures” expectations with the resources the family has. The “Desired Family Budget Line” usually includes professional achievements ensured by adequate social mobility, related income levels, a quality of life in line with societal standards, and social welfare matching the developmental stage.


If the actual resources a family can access are insufficient to meet the desired level of family development, or if the family’s developmental capability is constrained by a budget line smaller than Bd, such as the “Constrained Family Budget Line” (represented as Br in the graph), the family can only match (be tangent to) an indifference curve smaller than Id, or the “Constrained Family Indifference Curve” Ir. This new choice space results in: First, the career development of family members, especially working-age women, is hindered or at least does not fully meet personal expectations. Second, the family’s income level is tight compared to reasonable expectations, resulting in a quality of life that is less than satisfactory. Third, the actual number of children born is below the desired level, meaning the real fertility desire under family resource constraints is lower than the ideal fertility desire without budget constraints.


Unfortunately, the tightness of family budgets relative to the stage of economic development, which constrains career development and reduces the willingness to give birth, resulting in obstacles to family development, is not hypothetical. It is the unfortunate reality many Chinese families, especially young couples, face. In a previous study, the author examined the labor income and unpaid labor proportions of Chinese households during women’s reproductive ages (15-49) and peak reproductive years (20-34). It was observed that neither male nor female workers reached their career status and income peak throughout their prime reproductive years. At the same time, women’s time spent on unpaid domestic work and caregiving activities has been increasing (Cai Fang, 2021c). This aggregate situation, translated into the actual status of young families in real life, means they face the tightest financial and time budgets, creating a difficult trade-off between career and the “Three Nurtures.


Arguably, this condition is characteristic of a particular developmental stage, especially closely related to a certain level of human development. Based on data from the United Nations Development Programme (UNDP, 2020) and appropriate estimates, this article examines the labor participation rate of women and the proportion of time spent on domestic labor, comparing China with other countries and regions (Figure 5). Using 24 hours a day as a benchmark, Chinese women spend 11.1% of their time on unpaid domestic labor, slightly below the arithmetic average of 12.5% for all countries. However, the labor participation rate for Chinese women is as high as 60.5%, significantly above the arithmetic average of 51.6%. Moreover, Chinese women spend 2.6 times more time on domestic labor than men, indicating that their domestic labor burden is relatively heavy. This combination of employment responsibility and domestic labor burden is undoubtedly a major reason for the current low fertility rate in China.

可以说,这种状况是特定发展阶段的现象,特别是与一定的人类发展水平密切相关。根据联合国开发计划署(UNDP, 2020)的数据并进行适当的推算,本文可以观察女性的劳动参与率和从事家务劳动时间占比,并将中国与其他国家和地区进行比较(图5)。以每天24个小时这个总时长为基准,中国女性用于无报酬家务劳动的比例是11.1%,略低于各国该比例的算术平均值12.5%的水平。然而,中国女性的劳动参与率高达60.5%,显著高于各国的算数平均值51.6%的水平。同时又由于中国女性花费在家务劳动上的时间比例是男性的2.6倍,可见中国女性的家务劳动负担是比较重的。这种就业责任和家务负担都很重的状况,无疑成为目前中国的家庭生育意愿过低,并且实际总和生育率极低的重要原因。

Figure 5.  International Comparison of Female Labor Participation Rate and Domestic Labor Proportion Source: Calculated and drawn based on data provided by UNDP (2020). See the United Nations Development Programme website, http://hdr.undp.org/en/indicators/103006#.
图5  女性劳动参与率和家务劳动占比的国际比较 资料来源:根据UNDP(2020)提供的数据计算并绘制。参见联合国开发计划署网站,http://hdr.undp.org/en/indicators/103006#

Whether derived from existing international experiences or the current situation of balancing careers and the “Three Nurtures” in Chinese family development, we can conclude that China’s extremely low fertility rate is not predetermined. From Figure 4, by improving the level of human development, by moving the constrained family budget line to the desired family budget line level (moving from Br to Bd), reaching a higher level of utility satisfaction (raising the family indifference curve from Ir to Id), the fertility rate is expected to increase. However, according to international experience, enhancing human development is not merely about a composite human development index; it involves very specific conditions. For example, research by Myrskyla et al. (2011) shows that a sufficiently high Human Development Index combined with gender equality—ensuring the sufficiency of family resource budgets on the one hand and preventing discrimination against women in the trade-offs between career and the “Three Nurtures” on the other—constitutes a key driver for the rebound in fertility rates.

无论是从已有的国际经验,还是从中国家庭发展中职业与“三育”之间取舍权衡中的现状,都可以让本文得出中国极低生育率并非宿命的结论。从图4来看,通过提高人类发展水平,把受到制约的家庭预算曲线提高到期望的家庭预算曲线的水平,即从Br到Bd的移动,从而达到更高的效用满足水平,即家庭无差异曲线从Ir到Id的提升,生育率即有望得到提高。不过,根据国际经验,这里所说的提高人类发展水平,并不仅仅是从综合性的人类发展指数意义上而言,而是有着颇为严格的具体条件。例如,Myrskyla et al(2011)的研究显示,足够高的人类发展指数与性别平等程度的结合——一方面确保家庭作为一个整体资源预算的充足性,另一方面不造成家庭内部的职业与“三育”取舍权衡中对女性的歧视——构成生育率回升的关键驱动力。

V.  Conclusion and Policy Recommendations


The decline in China’s fertility rate is the result of rapid economic and social development during the reform and opening-up era and is in line with general trends. At the same time, the consequences of a low fertility rate and its resultant deepening aging population have constrained economic growth. “The person who tied the bell must be the one to untie it.” An appropriate resurgence of the fertility rate to replacement levels requires further socio-economic development. According to international experience, the socio-economic development level mentioned here is more aptly represented by the Human Development Index (HDI). As designed, theoretically defined, and statistically measured, the HDI inherently unifies economic growth and social development. In promoting this approach, social mobility and government-provided social welfare should be organically integrated.


Since the Reform and Opening-up, China’s human development has been built upon rapid socio-economic development, focusing on safeguarding and improving people’s livelihoods during development. On the one hand, the market plays a decisive role in resource allocation, emphasizing incentives and efficiency in primary distribution. On the other hand, the government plays a significant role, especially in redistribution, emphasizing fairness. This system and mechanism are consistent with the requirements for promoting shared prosperity and serve as practical measures to break the “fertility paradox.” However, just as economic growth cannot automatically resolve income distribution issues via the “trickle-down effect,” promoting fertility through human development will not happen naturally. Policies should closely address the real constraints Chinese families face to achieve tangible results.


The potential for China’s fertility rate to rebound is embedded in the following areas, and more targeted policy tools should be designed accordingly: 1. Among the factors that led to the decline in China’s fertility rate, there are both the regular driving forces of socio-economic development and the specific influence of the family planning policy. As policies continue to relax and supportive policies incentivize, the suppressed fertility desire will eventually be released. 2. China’s HDI has indeed risen quickly, reaching 0.765 in 2019, ranking among “high human development levels.” However, the fertility rate turnaround is still some way off. Typically, a rebound in fertility rates occurs when the HDI is between 0.80 and 0.85, which is in the “very high human development” category. 3. Alongside the general improvement in the HDI, it is crucial to focus on enhancing gender equality, which will create more direct conditions for reversing the declining fertility rate. China has a good foundation in this regard, but there is still a long way to go for further improvement.


The 19th Party Congress proposed continuous progress in ensuring that children are raised, students are educated, workers earn, the sick are treated, the elderly are cared for, everyone has a place to live, and the vulnerable are supported. These seven “provisions” are consistent with the direction of improving the HDI and providing more extensive coverage for basic public services for residents. In response to new challenges and demands of the new development phase, the tenth meeting of the Central Finance and Economics Commission emphasized promoting shared prosperity in high-quality development, striking a balance between efficiency and equity, and building a coordinated foundational system for primary, secondary, and tertiary distribution. In general, China has entered a phase of development where redistribution efforts are significantly increased, and the social welfare system is rapidly established. Specifically, China, under the unique condition of aging before becoming wealthy and having a very low fertility rate, has an urgent need to increase the level of basic public services and equalization, aiming to boost the fertility rate back to the desired level. As the most populous country, China has experienced the largest labor movement and demographic shift in human history and can also achieve the largest scale of fertility rate rebound.


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Cite This Page

蔡昉 (Cai Fang). "Breaking the “Fertility Paradox” [打破“生育率悖论”]". CSIS Interpret: China, original work published in Economic Perspectives [经济学动态], March 26, 2022

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