Will printing money mean more people in the People’s Republic?

What can you get for US$313 billion? Fifty million Chinese children.

So says Chinese economist Ren Zeping. Where will they get the money? Mr Ren answers that in his paper, “The solution to China’s low birth rates has been found”:

If the Central Bank prints up and puts 2,000 billion yuan ($313 billion) in the fund, China will have 50 million more babies in 10 years… This will solve China’s shortage of babies and offset its aging population, making the future more sustainable without burdening ordinary people, enterprises, and local governments.

This can solve China’s low-birth and ageing-population problems and energise the future without burdening people, companies and governments. Based on our studies, this is the only, and the most practical solution.

Now Mr Ren is not just any economist, but one the media seeks out for “expert” opinion. A Middle Kingdom policy wonk rock star, he became famous as Chief Economist at the corporate colossus Evergrande (salary rumored at $2 million plus), a “too-big-to-fail” property-developer teetering on the precipice of going belly-up. He is now Chief Economist at Soochow Securities. When Mr Ren speaks, people listen:

Based on surveys, the two major reasons stopping people from having children are high property prices and the high costs of raising children… Hence, lowering the costs of having and raising children is the major solution…

He has a point. The cost of raising a child in China is almost prohibitive. Mobility-conscious Chinese spend roughly 25% of their income for the education of just one child. In 2004, a home mortgage consumed 17% of income. By 2018 it was 48%. Up-and-comers shun blue-collar work for ‘quick money’ in the tech and service sectors, thus a labour crunch. Children get in the way.

Mr Ren understands this. Solution? Just get China’s central bank, the People's Bank of China, to print the money. Preposterous? Well, that is what America’s central bank, the Federal Reserve, does all the time to enable debt financing. That works (to a point) as long as the US dollar is the dominant world reserve currency. 

Not a good idea

Needless to say, not everyone is on board with Mr Ren. The Beijing News let the cat out of the bag, unleashing the inconvenient truth that just printing the money would create inflation, making it even more expensive to have children. Guess they’ve heard about America’s highest inflation in forty years.

Response? Mr Ren doubles down:

… China used to inflate real estate prices just by printing money. If we employ the same strategy here and start printing money to encourage births, we will have more young people in the future.

As for the economics of his proposal:

In the short term, it will help increase demand and stabilise growth, and in the long run, it will contribute to social vitality and long-term healthy economic development.

While the economics of Mr Ren’s outside-the-box proposal is debatable, his logic is tremendously flawed. Here’s where it gets really weird. He wants the fund created right away because: 

The fund is mainly for those who were born between 1975 and 1985. The government should stop counting on those who were born after 1990. The reason is simple. People born between 1975 and 1985 still believe that more children will bring more happiness. But for millennials and Gen Z, many of them don’t even want to get hitched.

Say what? Do the math! Folks born between 1975 and 1985 are now ages 36 to 46! Any realistic fertility initiative must target the folks most likely to bear children: millennials (born 1980 to 1995) and Gen Z (1995 to early 2012). If they do not reproduce themselves, demographic decline is locked in and will soon enough manifest in diminishing economic and military clout.

A complete overhaul

But Mr Ren nails it on one point: “People born between 1975 and 1985 still believe that more children will bring more happiness.” Indeed. Today many see children as burdensome and a cramp on their lifestyle. Maybe paying them to have children will help, but having to buy people off to have families is not a good sign. 

The sad truth about prospects for turning around China’s birth dearth: Fewer young people are getting married. The effect of decades-long government control of reproductive rights and one-child campaigns is embedded in the national psyche. Most people of child-bearing age came from one-child families. The country’s economic, social and educational systems remain based on the one-child model. Thus a domestic “great reset” is in order. The question is, does the Chinese government have the wherewithal to pull it off?

Mr. Ren: “In 2021, the comprehensive fertility rate will be 1.1, and the number of newborns will be around 10 million, while the intergenerational balance needs to be 15 million per year, that is, 5 million more births per year.” (China’s official fertility rate is 1.3. Other demographers, notably Yi Fuxian of the University of Wisconsin, place it closer to 1.1).


Mr Ren wants to reverse falling fertility -- for China.  How did China respond? On January 12, days after releasing his paper, Ren was cancelled: banned from Weibo (China’s alternative to Twitter) and his postings removed from WeChat (the world’s largest mobile app: instant messaging, social media, payments). This is a big deal. Ren had 3.6 million followers on Weibo. WeChat has over a billion users. No good deed goes unpunished.

Now at the “population death cross” (more deaths than births per year), China’s population decline is just beginning. This is cause for alarm in Beijing.  While the regime has lifted millions out of poverty and made China a superpower, reversing demographic decline is the most daunting challenge yet for the People’s Republic. 

Since August 2021 when China’s Population and Family Planning Law was amended to allow three children, incentives to make it easier for parents have been enacted in many jurisdictions.  These are just the beginning of what will be a gargantuan attempt to raise Chinese fertility.

Can they pull it off? We should know by 2030.

Good luck to Mr Ren.


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