STRATFOR GEOPOLITICAL DIARY

China abandons the one child policy

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ON Thursday (Oct. 29), the Chinese Communist Party’s 18th Party Congress revealed in its Fifth Plenum Communique that China will abandon the One Child Policy, allowing all couples to have two children. This follows a tentative loosening of restrictions in 2013.
The One Child Policy was adopted in 1979 in an effort to avoid massive overpopulation.

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However, as so often happens with reform efforts in China, unforeseen consequences of the policy gradually snowballed, leading to a huge gender imbalance contributing to social tension and an inverted population pyramid where a diminishing pool of young workers is supporting an ever-larger number of retirees. This has prompted fears in China that the country will grow old before it becomes rich.

China’s political leaders hope to reverse these distortions, but the fifth plenum decision will have few short-term effects. It took decades for the distortions caused by the One Child Policy to accumulate and compel action from the Communist Party. It will take a similarly long time to truly reap any benefits from the policy’s total repeal. At this point, it is not clear that abandoning the policy will produce the desired results, but whether or not China sees long-term benefits, there will almost certainly be unintended geopolitical consequences.

Rather than a single monolithic China, there are two Chinas: a relatively wealthy coastal region home to 400 million, including much of China’s middle class, and a largely rural interior home to 900 million, many of whom have seen only minimal benefits of economic growth since Deng Xiaoping ended China’s self-sufficiency. High costs of living — and thus of raising a second child — in coastal cities imply that the inland population is likely to grow more quickly than the coastal population. This will widen the chasm between the two Chinas.

As Stratfor has noted in the past, the coastal-inland divide is a major cause of instability in China. Tremendous coastal-inland inequality during the years of the Chinese Republic (1911-1949) was crucial to the Communist victory in 1949. Under Mao Zedong, China was isolated from the global economy. The coastal-inland contrast blurred as China developed a cellular economic structure, with each provincial economy designed to be self-sufficient.

The divide sharpened once more after Deng took power and pursued export-led growth.
China shifted away from the Maoist economic structure and pursued specialization. Inland China specialized in supplying manpower and the raw materials that coastal China transformed into exports. This state of affairs was tolerable for the inland Chinese, with the implicit understanding that while the coastal Chinese would get richer earlier, the rising tide would eventually raise all boats. However, rapid economic growth is no longer the assumption of the day. The Fifth Plenum Communique also confirmed that China would target “medium-high economic growth” for the 13th Five Year Plan, meaning growth between 6 and 7 percent — much lower than the double-digit growth that characterized most of the post-Deng years and underpinned the belief that inland China naturally would benefit from overall growth. For this reason, inland China’s population, likely to swell in the coming years from the relaxation of the One Child Policy, may be squeezed as coastal China demands fewer resources and gradually automates manufacturing.

The widening divide is particularly important because it will occur as China experiences a political crisis at the highest levels of power. At the same time that leaders in Beijing, dominated by coastal interests, are attempting to centralize power, this population shift will build up the constituency for inland interests, potentially challenging the prevalent coastal interests and creating political friction. It will only add to the urgency of reforms to both tap into and employ this growing inland population.

Just as the promulgation of the One Child Policy led to massive social and economic distortions, its repeal is likely to be similarly problematic. Policy reversals in China do not simply reverse unintended consequences; on the contrary, they beget them. The net effect of this shift in the next decades, as the effects of the repeal become apparent, will be to deepen, not eliminate, the coastal-inland divide. History has shown that this is likely to produce unrest — either among the political elite, or more worryingly, within Chinese society as a whole.

© 2015 STRATFOR GEOPOLITICAL INTELLIGENCE

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