High home prices key factor behind people's reluctance to have second child

A Chinese couple plays with their two children at home in Xi'an city, northwest China's Shaanxi province, on July 27 2016. Photo: Imaginechina

The soaring prices of residential properties have diminished the Chinese citizens' desire to have a second child, irrespective of the abandonment of the decades-long one-child policy by the Chinese government, which is going out of its way to increase birthrate amid worries over population aging and shortage of workforce, said analysts.

Conscious of the disappearing demographic dividend, which China had depended on to grow its labor-intensive economy for decades, the Chinese government scrapped the strict one-child policy, which required each couple to have only one child, in 2016, only to find that 17.23 million babies were born in 2017.

Demographers think the 2017 births are not favorable for realizing the country's population development strategy, which aims to increase the total fertility rate to 1.8 children per woman.

According to statistics from the World Bank, China's total fertility rate stood at 1.62 children per woman in 2016, lower than the world's average of 2.43 in the same year. The fertility rate of 2.1 is widely identified as a minimum parameter for balancing a nation's intergenerational population.

Facing the demographic challenge, the Chinese government has rolled out a series of incentive policies to boost reproduction, with the People's Daily, the mouthpiece of the Communist Party of China, even publishing an article in which childbirth is elevated to an issue of national importance.

However, things go athwart.

A survey released by the Tsinghua-Evergrande Institute earlier this year shows that the high home prices have dampened the Chinese citizens' decreased willingness to give birth to a second baby. Some 120,000 people joined the survey, most of whom are people born in the 1980s and 1990s. Comparatively, in the United States, birthrate has inverse correlation with home prices, according to a report by property management platform Zillow.

Recently, Zhou Yinggang, a professor at the School of Economics of Xiamen University, Meng Lina, an assistant professor at the School of Economics of Xiamen University, and Peng Lu, a graduate from the School of Economics and Management of Tsinghua University, conducted research on the factors that affect the Chinese people's reproduction desire.

According to the research findings, the families perplexed by high home prices are more inclined to refuse to have a second kid than those living in the cities where residential properties are affordable. The couples with no permanent houses and working in the first-tier cities such as Beijing and Shanghai are more likely to chose not to have a second child, show the research findings.

The three scholars said that the high housing prices would definitely increase the living costs and result in the shrinking of daily expenses for raising a second child. The situation appears to get worse in the big cities where workers suffer from heightened economic pressure and have little time to take care of more children due to concerns over career prospects.

In the first-tier cities, the middle-class families are facing consumption downgrade largely due to their huge housing loans, said Peng Yanyan, a consumer goods analyst at Swiss multinational investment bank UBS.

Peng predicted that the consumers in the first-tier cities would take the cost performance of products into consideration and try to reduce big one-off consumption.

Because of the soaring home prices and the increasing liability ratio of families, who see property purchase as a big investment channel, the Chinese consumers will continue to reduce their expenditures, as the China-US trade war might further affect the personal income, said Peng.

Experts have suggested that the local governments should design more favorable policies such as reducing taxes and providing indemnificatory apartments to those who want to have a second child.

So far, many provinces have rolled out support policies such as delivery subsidies and extended maternity leave in their efforts to encourage fertility.

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