The headquarters of the People's Bank of China in Beijing Photo: IC

In a rare move, the People's Bank of China (PBC), the country's central bank, published on Wednesday a working paper indicating that the country should not only fully lift the family planning policy, but also encourage couples to have more children in an effort to tackle the ageing population trend.

The main contradiction facing China at the moment has changed, from population expansion to the imminent loss of demographic dividend and the growing crisis of population ageing and fewer births. The report, "Understanding and Countermeasures on China's Population Transition," published by the PBC highlights that it is necessary to lift the fertility rate and allow people to have more children in a timely manner. Additionally, the pension system should also be improved, the paper noted.

Any delay would miss the valuable window of opportunity to respond to the demographic transition with fertility policies, repeating the fate of developed countries, said the paper.

The demographic transition is a new phenomenon for human beings, and so far, only developed countries have experienced this transition, with an ageing population and fewer children. 

But even developed countries have not gone through a complete cycle, the paper said, noting that developed countries have not clearly understood the impact of the demographic transition and, up to now, there has not been a good solution to the problem.

Over the past 70 years (1950-2019), the proportion of the world's population aged 65 and above has increased from 5.1 to 9.1 percent and the figure is set to double in the next four decades, according to the United Nations.

The paper also highlighted the potential rising gap between China and the US over population transition.

The core of China's economic growth in the past 40 years is that the demographic dividend can be transformed into productive forces. In the past decade, the economy has entered a new normal, which is directly related to the shift of labor force, from growth to decline, since 2010, according to the paper.

In contrast to China's population changes, the US is undergoing a favorable demographic transition thanks to immigration and other reasons, stated the report.

The UN predicts that the US will have 50 million more people in 2050 than it did in 2019, an increase of 15 percent, while China will have lost about 32 million people, or a 2.2 percent drop, over the same period.

If China has narrowed the gap with the US with cheap labor and a massive demographic dividend in the past 40 years, it is worth pondering what it will rely on in the next 30 years, concluded the report.