Tyler Durden zerohedge.com Back in 1978, the Chinese politburo enacted the "one-child policy", whose main purpose was to "alleviate social, economic, and environmental problems" in China as a result of the soaring population. According to estimates, the policy prevented more than 250 million births between 1980 and 2000, and 400 million births from about 1979 to 2011. And while not applicable to everyone, in 2007 approximately 35.9% of China's population was subject to a one-child restriction. Regardless of the numbers, things are about to change: with the Chinese economy now having peaked and suddenly finding itself in rapid deceleration with excess credit growth providing virtually no boost to marginal growth, the Chinese government is forced to reexamine 35 years of social policy in order to extract growth from the one place where for nearly 4 decades it had tried to stifle: demographics. According to the 21st Business Herald which cited sources close to the National Population and Family Planning Commission, China may relax its one-child policy at end-2013 or early-2014 (read end) by allowing families to have two children if at least one parent is from a one-child family. A plan for allowing all families to have two children after 2015 is also being reviewed. According to Bank of America's Ting Lu, the news is reliable and is in line with the bank's view. BAC expects around 9.5 million babies to be born as a result of such reform. China’s A-share market welcomed the news on Friday with baby-related stocks up sharply. To say that this is a paradigm demographic shift at the world's most populous country is an understatement. And while we will provide further analysis in the days to come, here is Bank of America's cursory assessment of what this will mean for the Chinese economy.
We are optimistic that an end to the one-child policy will soon be confirmed. In fact, in our report Post-leadership change reform: End of the one-child policy? (24 Jan 2013), we predicted that the window for the population policy reform could be 4Q13 around the ruling party's annual meeting or 1Q14 around the people’s congress meeting. We believe that the reform-minded president Xi and premier Li will use the opportunity of abolishing the one-child policy to build up their authority, show their determination in making changes and convince the Chinese people that they do have a roadmap for reforms.The estimated impact: Around 9.5mn incremental babies If the 21st Business Herald news is confirmed, the demographic reform path (which we called “piecemeal path” in our earlier report) is more conservative than our baseline “middle path”, which is defined as allowing all families to have two children without any restrictions. So is this a big disappointment? Not really. This is because the one child policy now is only strictly enforced in urban areas and some developed rural areas where most couples of child-bearing age have at least one singleton (note China’s one-child policy started in the late 1970s). to read more click here: zerohedge.com
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