Sat, July 13

Changes in China’s Fertility Rate in 2023 and Its Impact on the Labor Market

On October 12, 2023, the National Health Commission of China released the Statistical Bulletin on the Development of Health and Health Care in China in 2023. This report detailed the population data from the previous year, including a total of 9.56 million births. Of particular interest were the proportions of second and third children, with second children accounting for 38.9% and third children or more accounting for 15%. Additionally, the report indicated a gender ratio of 1:1.1 among the newborn population.

The data revealed a rapid decline in the proportion of families having a second child, dropping from over 50% to below 40%, while the proportion of families having a third child increased to 15%. With the increasing age of parents in second-child families, the sustainability of having a third child is in question. As the overall birth rate decreased, an unexpected but rational shift was observed in the rebound of single-child families.

Furthermore, the gender ratio of newborns exceeding 1:1.1 was surprising. Particularly when considering the rise in the proportion of third children from the previous year, it can be speculated that many older families may still prefer to have boys. If they were aiming for girls, the gender ratio should be decreasing rather than surpassing the abnormal level of 1:1.1.

The second news report covers the release of population segmentation data. Two days ago, the National Bureau of Statistics announced the sample survey on population changes in 2023. To accurately and timely monitor and reflect the changes in China’s population, a nationwide sample survey will be conducted. Generally, a population census is conducted every ten years, with years ending in zero being census years, such as the seventh population census in 2020. In years not ending in zero, a one per cent sample survey will be conducted in years ending in five, such as in 2015. For the remaining years, a one-thousandth sample survey will be conducted. However, the announcement made in a year ending in three did not specify whether it is a one per cent or one-thousandth sample survey. Therefore, following the seventh population census, a sudden sample survey was conducted. It is unclear whether this is in preparation for the implementation of policies encouraging more births, such as the two-child policy. At present, it is premature to conclude, so let us wait and see.

Before the National Day holiday in 2023, Suzhou reserved eight carriages of the G1738 train specifically for a special talent recruitment train bound for Wuhan. This event was a targeted invitation by the Suzhou municipal government to over 600 students from universities in Wuhan, with over 80% of them being master’s and doctoral students. These students would participate in recruitment activities and sightseeing over two days, with all transportation and accommodation expenses covered by the Suzhou municipal government. The official media outlet of the Suzhou municipal government, Suzhou Daily, also published a related report.

During the event, students from Huazhong University of Science and Technology successfully passed interviews in Suzhou and even went to meet the parents of their Suzhou girlfriends, passing the parents’ interviews as well. Some commented that Wuhan University students managed to find jobs and solve their love life issues in Suzhou in just one day, which seemed somewhat provocative. Suzhou targeted Wuhan’s talent resources and implemented this strategy.

Suzhou, with a GDP exceeding 2 trillion, recently upgraded to a mega-city with a population of over 5 million. Its A-share listed companies rank among the top five nationwide, making it an industrial powerhouse in China and globally. However, the city faces a shortage of university graduates and highly educated professionals. Wuhan boasts seven Double First-Class universities with around 1.3 million undergraduate students. The outflow of Wuhan University students has become a tradition, especially among top talents. For example, in 2020, only 30% of graduates from Wuhan University and Huazhong University of Science and Technology chose to work in the province, while 70% opted to work elsewhere.

Suzhou offers an attractive economic environment and specifically targeted Wuhan’s pain points with this initiative.

Although these three news stories may seem unrelated, they all involve issues related to population. The increase in the proportion of third births and the decrease in the proportion of second births reflect a downward trend in the total number of newborns. The sampling results after the seventh national census differ from previous years, indicating that there may be more policies to encourage childbirth in the future. To attract young talent, fierce competition has emerged among new second-tier cities, revealing another aspect of the population issue. The sharp decline in first births, the decrease in the proportion of second births, and the increasing age of parents of third births pose a challenge in stimulating the willingness to have children. Measures such as providing parental leave allowances and even subsidies for buying houses for third children seem to have limited effectiveness, as everyone is well aware. The main reason lies in the sharp decrease in the number of marriages, with the number of first marriages halving from 2013 to 2021 over 8 years. Simply encouraging those who are already married or have already had children may not necessarily be effective at this point. Therefore, the effectiveness of relaxing policies on non-marital childbirth also seems questionable.

The proportion of non-marital births is higher in Western countries, mainly due to cultural influences. For example, in France, the rate of non-marital births is as high as 62.2%, while in East Asian countries like Japan and South Korea, the rates are only 2.5% and 2.4% respectively. Even with increased financial subsidies, it may not necessarily solve this issue. Regardless of whether the government can afford such expenditures, as mentioned by Liang Jianzhang, providing a monthly subsidy of 2000 yuan per child for multi-child families until the age of 20, along with a policy of halving income tax and social security contributions, may not have a significant impact.

Taking South Korea as an example, over the past 16 years, the government has invested 280 trillion Korean won to encourage childbirth and has implemented over 100 incentive policies, yet the birth rate has still dropped to the lowest level in the world. Japan has also introduced various free policies from birth to child-rearing, established numerous institutions, and enacted a large number of laws, but the number of children under 14 has been declining for four consecutive years. In terms of childbirth, it seems that China, Japan, and South Korea are facing similar challenges.

On the other side of the population issue, as the identification of the population of young and middle-aged adults intensifies, the competition for the labour force has entered a fierce stage, which also means that the nationwide talent war is coming to an end. In the first census in 1953, the population of young people aged 14 to 35 in China was only 196 million. By the fifth census in 2000, it peaked at 490 million and has been declining since then. By the seventh census in 2020, the population of young people in China had dropped to 401 million. The talent war began in 2017, and so far, any measures to encourage talent introduction have failed to generate significant responses. Once considered as new first-tier cities, western third and fourth-tier cities, and coastal cities, the labour force population has reached its peak, and the number of young people under 35 is decreasing, making the situation increasingly unfavourable for rural areas and county towns. In this scenario, the new first-tier cities are competing for talent, trying to outpace each other. At this time, coastal cities are showing a trend of polarization, with a scarcity of top-notch talent with advanced degrees on one hand, and an increasing number of elderly migrant workers returning to their hometowns and fewer young people entering factories on the other hand. For the young and middle-aged labour force without educational requirements, the market remains open.

In early 2023, after the Spring Festival, factories in coastal areas were eager to work overtime to catch up on production. Cities like Guangzhou, Shanghai, and Fuzhou offered free chartered flights and buses to attract workers from other provinces. They put up large advertisements, almost giving the workers red flowers to wear. They were either competing for highly educated talents or competing for highly physical labourers. Major cities were also competing for talent, with similar practices. As for those with intermediate positions, such as graduates from second or third-tier colleges, their attitude towards major cities was: if they want to come, they will come. Major cities emphasize adaptability. Third and fourth-tier cities understand that they cannot compete with provincial capitals and coastal cities in terms of industry, so they choose to take a different path, focusing on promoting their tranquillity and comfort. In recent years, many small cities’ tourism bureaus have been vigorously conducting live broadcasts and dressing up, and many places have been making great efforts to hold music festivals. There is a clear stratification among cities, with different types of people going to different cities. This phenomenon of urban differentiation is expected to further intensify.

According to the data, the number of migrant workers in the Pearl River Delta decreased by nearly 5 million from 2017 to 2021. However, Guangdong Province still saw a net population inflow of around 1.6 million, indicating that over 6 million non-migrant workers migrated to Guangdong during this period. The author concludes that amidst the overall population decline, most cities are experiencing a population reduction, while only a few cities are seeing population growth, leading to an increasing concentration of population. The author believes that all issues are human-made problems, which will be the ultimate challenge that all industries and cities will have to face in the future.

From a city perspective, the competition for talent between Suzhou and Wuhan is happening against the backdrop of a decline in the working-age population. Strong cities will go all out to compete for the talent they need. From an industry perspective, the sharp decline in the birth rate of first and second children will have an impact on the front end of the industry chain, affecting sectors such as infant formula, obstetrics, postpartum care centres, interest classes, and tutoring classes. This also indicates that upstream industries such as healthcare, home care, aging-in-place renovations, nursing pharmacies, and robotics will also be promising sectors in the next 10 years.