China's new policy of allowing two children for every couple will help the country address some but not all issues related to its growing graying population, said observers.
The central government announced on Thursday the end of the country's 35-year-old policy that basically limited couples to one child.The move follows steadily declining birth rates and changing demographics that are reducing the working population.
Robert Dekle, professor of economics at the University of Southern California, said this is "a great policy change that should help arrest in a few decades the aging of the Chinese population - a bold and welcome policy move".
In 2014 the Ministry of Civil Affairs said more than 131.6 million Chinese were over the age of 65, or about 9.7 percent of the population.The population of those at 60 or above reached 202 million at the end of 2013, or almost 15 percent of the total population, and is expected to exceed 300 million by 2025. According to international standards, a country or region is considered to be an "aging society" when the number of people at 60 or above reaches 10 percent or more of its total population.
Mary Gallagher, director of the Lieberthal-Rogel Center for Chinese Studies at the University of Michigan, said the change will have a positive effect on the Chinese economy if families have more children. "Many urban families do want a second child but they fear the additional costs in housing and education. If they do, then this will contribute to the younger population and help alleviate the decline in the working population and the rapid aging of Chinese society," she said.
Winston Tseng, research scientist in the school of public health and department of ethnic studies at the University of California Berkley, said this new policy is very important for a prosperous future in China and to ensure more workers in the long term are able to care of older Chinese adults. However, Tseng said the short-term impact is "very limited" as it will take at least 1-2 generations for this new policy and its implementation to fully address longer-term care issues facing the aging Chinese population.
Gallagher said if the expansion in family size happens mainly in the countryside, this could eventually expand migration from rural to urban areas. "But most rural families can have more than one child already so I do not think this will have a major impact. Urbanization in China will continue at a rapid rate. The most important reform for the government to tackle in this regard is not the population policy, but the hukou policy (household registration system)," Gallagher said.
Tseng said China's aging issue is not as severe in rural regions when compared to urban regions because there are more family members to support older family members in rural areas. "Rural to urban migration is also slowing down today as young working populations in rural regions migrating to urban regions is also declining as rural regional development catches up," he said.
In addition to a demographic shortfall, China will also have to address a shifting family dynamic from the country's economic transformation.
"The emergence and growth of long-term care institutions and foreign labor workers to care for aging populations may be play an increasing role in the future of China's aging service industry," said Tseng.
Gallagher said the policy change will also present new challenges for the government to alleviate the cost of housing and education in China's major cities. "Middle-class families that want to expand their family size will want more assistance from the government to do so," she said.
After China announced it was ending its one-child policy,shares of Mead Johnson Nutrition, the company that makes Enfamil - one of the leading baby formula brands in China— rose 4 percent. China is the Glenview, Illinois-based company's biggest market with nearly a third of its sales.
Mead Johnson competes with European Nestle and Danone in China as well as several domestic makers of baby food.
Research firm Euromonitor International has estimated that baby formula sales in China are expected to double in the next five years, from $19.9 billion this year to $40.6 billion in 2020.
