Microsoft Word EcRefChina Oct06. doc

partly a response to these threats, although they may also be a reaction to the 
skewed proportion between newborn boys and girls (1.18 instead of the more 
normal figure of around 1.03). It is, however, unlikely that a removal of the one-
child policy can help the demographic situation to any considerable extent due to 
the rather 
universal
relation between modernization and low fertility. Moreover, 
experiences from many countries suggest that it is not easy, although not 
impossible, for governments to boost fertility.
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Since China is “getting old before 
getting rich”
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, these problems will emerge at a lower per capita income level in 
China than in today’s developed and middle-income countries (Liu, 2006).
The situation is further complicated by the likelihood that a gradually falling share 
of individuals of working age will reduce per capita GDP growth. This is likely to 
take place both through a reduction in aggregate labor supply and through a 
(predicted) fall in the household saving rate. It is also likely that the aging of the 
population will harm the vitality of the economy, since innovation and new 
entrepreneurship often emerge among young cohorts. 
East Asian countries except Japan. The share of the population 60 years and above is predicted (by UN, 
2003) to increase from 7 percent in 1975 and 12 percent today to about 30 percent by 2050.
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Although the drastic fall in fertility has probably been speeded up by the official one-child policy, the 
time path of the fertility rate in China does not differ drastically from what has happened in other East 
Asian countries during comparable periods of ”modernization” (UNPD, 2004). 
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Quotation from title of article by Tian (2004). 

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The social consequences of the 
urbanization
process are also far-reaching. In principle, it 
is administratively easier to build up systems of income insurance for employees in urban 
areas than for the farm population. Moreover, the reallocation gains in connection with 
urbanization expand the aggregate tax base and this helps finance both income insurance 
and human services. There are, however, also well known negative social consequences 
of urbanization. Without interventions against car traffic in cities, for example through 
fees on driving (congestion fees), the traffic system is bound both to be inefficient and to 
harm the quality of city life by way of pollution, crowding and noise. Since such policy 
interventions are politically easier when the car owners are still a small minority, the 
Chinese authorities have a political “window of opportunity” in the near future to deal 
with these problems. Criminality, the misuse of drugs and alcohol, and mental disorders 
seem to be other “unavoidable” consequences of urbanization, not least in large cities. 
General
 
social policies – like income insurance and liberally provided human services – 
have in most countries turned out not to be enough to deal with these problems. 
Experience suggests that highly 
selective
(targeted) social interventions among specific 
groups of citizens are also necessary – although such interventions often also seem to 
have rather limited effects. In the case of China, it might be possible to limit various 
negative social consequences of urbanization by promoting the growth of small and 
medium-sized cities, as alternatives to ever larger mega-cities (with 10 to 50 million 
people). “Medium size” might then be interpreted as cities with between half a million 
and one or two million people.
All these social problems have recently become gradually more observed and discussed 
both in China and among foreign observers. The central political authorities have also 
recently announced ambitions to improve income security and the provision of human 
services, in particular in rural areas. Against this background, it is of interest to look at 
alternative options in future social policies in China – an issue to which I now turn. 

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