quarta-feira, 4 de novembro de 2015
Beijing cannot control babies or banks
China’s Communist party has made two recent, highly symbolic policy changes. Both signal a retreat from important areas of people’s lives: their bedrooms and their bank accounts. It was the first, the end of the one-child policy, that stole all the headlines. But it is the second, the seemingly obscure removal of a cap on bankdeposit rates, that could plausibly augur more significant change.
The scrapping of the one-child policy after three brutal decades is indeed an important milestone. The policy, introduced in 1979, was the most graphic illustration of the Communist party’s instinct to control. It was also the most hated. The millions of state officials charged with enforcing it — through fines, sterilisations and even forced abortions — are among the most despised. As recently as 2012, online photographs posted by the relatives of a woman made to abort a seven-month-old foetus provoked outrage. The effects on society have been equally grotesque. Because of a preference for boys, sex-selective abortions have resulted in one of the world’s most skewed sex ratios. At its worst, in 2008, there were 120 boys born in China for every 100 girls.
From a human rights standpoint, then, ending the policy is unmistakably good. But as a practical measure it may have limited effect. It is not even clear how dramatic an impact it had in the first place. The biggest drop in China’s fertility rate (births per woman) occurred in the decade before the policy was introduced. From 1970 to 1979, it halved from 5.8 to 2.8. Since then, it has fallen to well below the 2.1 needed to keep a population stable. That may owe more to growing affluence and urbanisation than to the policy itself.
Even if the fertility rate could be raised overnight, the effects would not be seen for decades. China is already one of the fastest-ageing societies on earth. By 2030, it will have the same age profile as Japan, whose economy has not grown in nominal terms for 20 years. Over the next 15 years, China’s working-age population will shrink by 10 per cent, according to the UN. The years when it could achieve easy growth by shifting people from farm to assembly line are over. If China is to reach its goal of becoming a wealthy country, it will need to innovate. It should also aim to get there by 2030. After that the demographic headwinds will be intense.
What then of the other change? The lifting of the cap on deposit rates is the latest step in deregulating domestic interest rates. For many years, deposit rates have been kept artificially low. This allowed the state to recycle high household savings into favoured industries via artificially low lending rates. In China, such “financial suppression” found a parallel in the one-child policy. In both, the interests of the individual were sacrificed to those of the state.
Just as the one-child policy long ago became counter-productive, so the party’s instincts to control the economy risk hampering the very rebalancing that it seeks. China now needs a better allocation of capital. It needs less money to be pushed into heavy industry, and more into services and innovative industries, many of them outside state control. It also needs a greater share of income to stay in people’s pockets so they can spend more.
Ending financial repression is an important step in the right direction — if it lasts. It is one of a plethora of measures laid out after the Communist party’s Third Plenum two years ago. That document, which envisaged a “decisive role” for markets, included fewer subsidies to state-owned enterprises, more emphasis on consumption, and less state intervention.
Progress has been choppy. When the stock market started plummeting and when a change in exchange-rate regime caused havoc, the old instincts to intervene kicked in. The latest five-year plan, a concept with decidedly Soviet overtone, puts most emphasis on doubling 2010 output by 2020. That implies growth of 6.5 per cent for the rest of the decade. If the pace slackens, the temptation may be to pump prime the old parts of the economy, precisely the industries that a truly liberalised banking system would shun or penalise with higher lending rates. The stop-start nature of recent reform suggests there are elements of the state that want to retreat from economic planning and elements that are loath to let go. The same tension must have kept the one-child policy in place long after its sell-by date.
Yet the Communist party only needs to look across the Taiwan Strait to see the limits of control. In Taiwan, where people are free to have as many babies as they wish, the fertility rate is precisely 1.0. In “one-child” China it is 1.6. As Hans Rosling, a Swedish academic, says, “there are forces in the bedroom that are stronger than the Communist party”. That applies equally to market forces — which is why they are so scary.