State action lowered the birth rate in China, but it won’t be able to raise it — and might, in fact, shrink it even more.

G overnments can be dominated by inertia, self-serving statements, and bureaucratic politics — dictatorships more so than democracies, as democracies at least have corrective mechanisms. At times, it seems that what matters most is not solving problems but appearing to solve problems. Take a look at China’s latest moves to deal with its population decline.

To encourage childbirth, the Chinese government announced on July 28 a bonus of 3,600 renminbi (about $500) for each child under three. Over three years, this subsidy tallies to $1,500, a sum unlikely to materially change China’s looming demographic collapse. Even with the relatively low cost of living enjoyed by many Chinese, $500 would allow a family to purchase perhaps 50 pizzas — one a week.

This suggests that the main challenge China faces in its efforts to reverse its demographic collapse is its own government’s policies. When governments encounter problems that are long term while the costs are immediate, they are incentivized to downplay both the extent of the problem and the costs to remedy it (think U.S. budget deficits). In China, the nature of the Communist Party enhances this problem, as a dictatorship must rationalize its role by maintaining that it has the best policies, the best answers, and the best interests of the country in mind. Thus, the CCP is further compelled to minimize the nature and cost of the problem. This is a built-in bureaucratic argument against raising the importance of this issue. The vice minister who states, “We have a problem,” does not get promoted. The vice minister who states, “We are facing a demographic challenge that many countries around the world are facing, and we are taking steps to address the problem,” gets promoted.

The nature of the problem is eye-opening, and “collapse” is not too strong a word: In 2024, China’s total fertility rate stood at approximately 1.1, roughly half the 2.1 level required for population stability. Although the population decline in 2023 was only 2 million, a modest figure in the context of a population of 1.4 billion, the longer-term trend is sobering. The Shanghai Academy of Social Sciences — not known for pessimism — projects a low-end scenario in which China’s population falls to 525 million by 2100.

We are seeing that the Chinese government has been reasonably successful in shutting down the birth rate but is finding it much harder to reinvigorate it. This demographic challenge is indeed faced by Japan, Korea, and many European countries, but we might see it most acutely in China because none of those other societies took the enforcement measures China took to reduce the birth rate. Simply put, no society has ever successfully reversed course on birth rates. No society has ever turned on the switch after having turned it off.

The challenge China must deal with is that — in contrast with Marxist analysis — people are more than economic creatures. If population issues were like steel production, China would be making all the right moves. A rise of 10 percent in steel production can be produced simply by a government decree. Unfortunately for China, the same top-down, party-directed method that would generate that increase in steel is not likely to be the right approach to reversing the population decline and might make the problem worse.

The transcendent joy of children is not part of the government discussion, no more than the transcendent joy of steel production. As women experience more affluence, independence, and comfort, why would they give that up to become the principal caregiver and the person held most accountable for the success of their children? When options for young women are constrained, the joy of motherhood can also be diminished, and children are commoditized.

There are other factors as well, such as societal norms. Once people become accustomed to a way of doing things, it becomes their default behavior. Everyone wants a car; you should want a car. Everyone has a small dog; you should have a small dog. Everyone wants to take a trip to Europe; you should take a trip to Europe. Every family is happy with zero or one child; you should be happy with zero or one child. You might have even faced legal problems or public criticism for having two children only a few years ago; why would this be your goal today?

Beyond this norm, the desire to have children can be driven by confidence in a stable, prosperous future, the desire for personal independence, the concern for women’s role in society, and even Covid-related turmoil. The $500 payment is unlikely to change anyone’s mind, but it might shift timing. A small bump in births could appear in nine months, but I suspect this nominal improvement will be washed out when averaged over several years.

So, over the next three years, nothing really changes as the population continues to decline, despite this bump. Then the bounty will be raised from $500 to $1,000 for a subsequent three years of decline. Nothing really changes. Enjoy your pizza.