Print money to fuel baby boom, economist urges

The chief economist at SooChow Securities, Ren Zeping, has suggested the creation of a national ‘birth fund’.

Ren Zeping has proposed a controversial solution to China's low birth rate and rapidly ageing population. Picture: Weibo

China’s central bank should print extra currency worth more than $435bn a year to incentivise the population to have more children, a leading economist has said.

Ren Zeping, chief economist at SooChow Securities, based in Suzhou near Shanghai, suggested the creation of a national “birth fund” as a solution to the country’s falling birth rate, only to draw criticism from state media and ridicule from members of the public.

On Tuesday he defended his proposal to inject an extra 2 trillion yuan annually over the next decade as a practical way to avoid a demographic crisis, suggesting that it could lead to an additional 50 million babies being born by 2032.

“It’s not a spur-of-the-moment suggestion, but one based on our past studies, after years of research, exploration and comparison with international experiences,” Mr Ren wrote on the Chinese website Weibo. “It’s been scientifically argued. We are serious with this suggestion.”

After decades of measures to control population growth and limit families to one or two children, China’s birth rate has plunged in recent years. In 2020 the country recorded its lowest birth rate in decades, at 8.52 births for every 1000 people, despite relaxing the one child policy in 2016. Official data showed that 12 million babies were born in 2020, down 18 per cent from 14.65 million in 2019. Births are believed to have fallen further last year as couples delayed becoming parents or opted not to have children at all.

Mr Ren and his team argue that the main reason for the low birth rate is the high costs associated with raising a child. They say that proposed birth fund could be used to offer cash subsidies to families to reduce their personal and business tax burdens, subsidise housing costs and build more childcare centres.

“Evidence suggests that the fertility rate could have further dropped to about 1.1 (births per woman) … and the number of births could have fallen to around 10 million in 2021,” Mr Ren’s team wrote. “In the past, we have printed money to stimulate the property market, leaving behind high housing costs. If we should print money to encourage births, we will leave behind a generation of young people.”

A previous study by Renmin University in Beijing showed that fewer births among women under the age of 30 was a factor in the crisis.

Mr Ren’s team argues that the extra currency should be injected as soon as possible so that women born between 1975 and 1985 will bear more children.

“Don’t count on those born in the 1990s or after 2000. The number of women of childbearing age in our country is decreasing by three to four million a year,” the team wrote, adding that many younger women did not want to get married.

The Paper, a state-run news site, called Mr Ren’s proposal “empty talk” and said it would increase inflation. “For the central bank to print more money, it is not as easy as running the machine, but it will have a chain reaction on price, currency value and asset evaluation,” a commentary read. “As an economist, Ren Zeping cannot be ignorant of this. Yet he still put forward a public suggestion lacking common sense, and it can be only said he has done this on purpose to attract attention.”

Hong Hao, head of research for Bocom International, posted two charts of birth rates in relation to bonds in Japan and the US. “Foreign experience has shown there’s no relation between money printing and birth rate,” Mr Hong wrote. “It’s only futile to set up an earmarked birth fund.”

The Times