Why China's baby policy won't spur a boom

Joseph Foudy
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China's one-child policy may be a grand statement on its commitment to strengthen the Chinese economy, but the country will need more than just a policy change to stimulate consistent growth.
By Joseph Foudy
With the abandonment of the one-child policy, China is turning a page in its recent history. While a big policy change for the country of more than 1.3 billion people will no doubt change demographics, it is not likely to have much economic impact.

Since 1979, when the policy was introduced, China has averaged nearly 10 percent annual GDP growth. In that year, China was a poor rural and agrarian society struggling to recover from decades of economic mismanagement under Mao. It faced agricultural, social and economic challenges as its population continued to grow.

Now, with the end of the one-child policy, China is facing a pivotal moment of change as a country. China is now seeing a decline in its working-age population, facing a decrease in its growth rates and finding a need to transition to a consumption-based, innovation economy from one based on investment and exports. To understand why China has ended the policy, just look to the repeatedly asked question: "Will China get old before it gets rich?" The question suggests a false tradeoff, but reflects the reality that China's working-age population is set to fall over the next few decades cutting into growth.

Read more as published on CNBC.

Joseph Foudy is a Clinical Associate Professor of Economics.