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Fear and Steep Fines Still Haunt Chinese Families

TAIPEI ( TheStreet) -- In 2005, I interviewed a Shenzhen mother who had just given birth to a second baby and lived in fear of paying a steep fine if caught for violating the one-child policy. She and her husband weren't alone.

China is expected to ease its one-child policy next year and abolish it by 2016 following a proposal from  China's ruling party session last month. Communist officials aim to shore up the domestic labor force and add consumers to the economy, but their move will deliver too little too late.

"In brief, the impact of the policy on the size of workforce will probably be much less than many people think, as not all couples want to or can afford to have a second baby," says Wang Qinwei, China economist with London-based Capital Economics.

The one-child policy handed down in the late 1970s put then reclusive China on the world map for the unusually authoritarian way to control population growth. The policy has held since then, though with more recent exceptions for rural families whose firstborns are girls (not seen by traditional Chinese as farmhands) and for couples who are both single children themselves.

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The slow-growth policy has pushed the fertility rate down to 1.6, compared with about 2.4 for other countries at China's level of development, Capital Economics has found. That's also below China's replacement level of 2.2 The population aged 15 to 59 is set to fall by around 7% between 2010 and 2030, United Nations figures show.

And that's bad for productivity, a scenario that could raise labor costs for simple supply-demand imbalance reasons, further hobbling China's once world-class reputation as a place to go cheap while building out multinational corporations such as Microsoft (MSFT - Get Report) and Anheuser Busch Inbev (BUD).

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BUD $125.84 1.34%
MSFT $50.61 1.48%
AAPL $93.97 0.25%
FB $118.57 0.84%
GOOG $698.21 0.75%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

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