The Economics of Relaxing the One Child Policy

CNN assesses what a relaxation of the one child policy would have on China's economy.  The policy, which sets out how many children a couple can varies depending on the exact circumstances of the parents, but the demographic impact has been dramatic, and for those who break the rules, the fines can be extortionate - a major money spinner for local governments.

China has gotten old before it has become rich, and the aging population means a shrinking workforce, a situation not helped by limiting the growth of the next generation is such an overt way.  Changing the rules now may not give the expected results that mandarins where planning on, however.

Qinwei Wang and Gareth Leather, analysts at Capital Economics, wrote this week that a higher fertility rate "will not provide a solution to the worsening demographic outlook in the coming decade."

For one, even if birth rates were to increase, it would take 15 years -- or more -- for those children to enter the labor force. Wang and Leather also point to evidence that a swelling labor force added less than a percentage point to average economic growth over the past two decades.

Balancing the needs of the aged with the demands of the economy might prove to be a bigger headache than anyone imagined in the People's Republic

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