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•  Oct 27 2015 at 8:46 AM 
  

Chinese interest rate cut will spur more capital outflows

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[img=620x0]http://www.afr.com/content/dam/images/g/j/g/7/o/c/image.related.afrArticleLead.620x350.gkj4zk.png/1445895989894.jpg[/img]Zhou Xiaochuan, governor of the People's Bank of China, has a difficult task, trying to keep debt interest levels manageable for the country's manufacturers, while rewarding savers with a positive return. Feng Li
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by Karen Maley
October has been a terrible month for share market bears, but they at least have the consolation that it's only a matter of time before global markets are once again roiled by a falling yuan.
Few were surprised on Friday when the People's Bank of China (PBOC) cut its benchmark interest rate by a quarter percentage point, the sixth reduction in a year.
The central bank rate cut came days after official figures showed that in the third quarter China's economy expanded at its slowest pace since 2009. The country's consumer price inflation remains subdued, while the country's producer prices, which have been falling for almost four years, dropped by 5.9 per cent in September from a year ago as China's manufacturers continued to cut prices in response to persistently weak demand and widespread overcapacity.
Falling prices are putting huge strains on Chinese mining and manufacturing companies as they struggle to service their huge debt burdens. And this is reflected in rising problem loans held by Chinese banks, and by a series of near-defaults in Chinese bond markets.

Given the enormous debt level of Chinese companies, which is among the highest in the world at about 150 per cent of GDP, the PBOC has little choice but to continue cutting interest rates if it wants to avoid surge in the number of problem loans.
Lower interest rates will make it cheaper for banks to roll over problem loans, which means they will face fewer write-offs, and should ease some of the pressure they're facing from compressed interest rate margins.
But the latest rate cut creates a huge problem for Chinese savers, who once again face the prospect of negative real interest rates. After Friday's decrease, Chinese savers can look forward to earning an interest rate of 1.5 per cent on one-year term deposits, which is less than inflation rate, 1.6 per cent in September. The last period of sustained negative interest rates in China was in 2011, when inflation was higher and much tougher capital controls were in place.
This time around, the prospect of earning a negative real interest rate on their deposits will only encourage increased capital outflows, as ordinary Chinese savers try to shift their money out of the country.


Already, China is battling heavy capital outflows, which are estimated to have climbed to more than $US100 billion ($138 billion) in both August and September.
To offset these large capital outflows, the PBOC said it would reduce the banks' reserve requirement ratio by 50 basis points. This will increase liquidity strains by releasing an estimated 700 billion yuan ($150  billion) into China's financial system.
But economists argue that there is only so long the PBOC can keep its juggling act going. At present the Chinese central bank is cutting rates to bolster economic activity, knowing that this will cause capital outflows to continue.
What's more, they argue that lower interest rates should result in downward pressure on the yuan. But because the yuan has fallen less against the US dollar than other currencies, and this means that China's monetary stimulus is less effective.

Some analysts believe China is likely to keep its currency stable until the International Monetary Fund decides whether it will include the yuan in its select basket of reserve currencies. The IMF is expected to decide on its reserve basket in November, and there's a growing expectation the yuan will be included, joining the US dollar, euro, yen and Sterling.
When this decision is out of the way, however, there's little to stop the PBOC from engineering a sharp decline in the yuan.
The risk is that another devaluation could trigger a replay of the panic selling in global markets that followed China's surprise devaluation in August as investors worried a lower yuan would put even more downward pressure on commodity prices, and would make Chinese-made goods even cheaper in global markets.
What's more, a move by China to devalue its yuan will likely intensify the global currency wars as other countries respond by pushing their exchange rate lower in order to protect their share of global export markets, and this will only exacerbate the deflationary forces already whistling through the global economy.

Marc Faber: China Has Credit Bubble of Epic Proportions
http://www.bloomberg.com/news/videos/201...roportions

He is quite an astute fund manager and has been saying that for a while now, and is probably right. Unfortunately mr china market is still being irrationally exuberant. May take a while more before Sh** hits the fan..

sent from my Galaxy Tab S

(27-10-2015, 10:46 AM)BlueKelah Wrote: [ -> ]He is quite an astute fund manager and has been saying that for a while now, and is probably right. Unfortunately mr china market is still being irrationally exuberant. May take a while more before Sh** hits the fan..

sent from my Galaxy Tab S

I think you can wait forever... just hope that you have not been too bearish as even the most astute fun mgrs have been caught when their timing is off...

Mr. Marks' comment on China investment outlook...

Oaktree's Marks says China a 'teenager' with best years ahead
28 Oct 2015 07:20
[SINGAPORE] Oaktree Capital Group LLC's Howard Marks said China is beginning to appeal to him as an investment proposition after the recent market swoons, likening the world's second-largest economy to a "teenager" with the possibility of its best years ahead.

"All I know is that this is a better time because prices are way down and sentiment is very weak," Mr Marks, whose firm is the world's biggest distressed-debt investor, said during an event hosted by Bloomberg LP in Singapore on Tuesday.
...
BLOOMBERG

Source: Business Times Breaking News

http://www.channelnewsasia.com/news/asia...25928.html

China adopts two-child policy
China will ease family planning restrictions to allow all couples to have two children after decades of a strict one-child policy, the ruling Communist Party said on Thursday, a move aimed at alleviating demographic strains on the economy.

• POSTED: 29 Oct 2015 19:00
   
  
  
• UPDATED: 29 Oct 2015 21:00
  

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[img=768x0]http://www.channelnewsasia.com/image/2226046/1446117624000/large16x9/768/432/file-photo-of-woman-and.jpg[/img]A woman and her baby wait on the street for a military parade marking the 70th anniversary of the end of World War Two, in Beijing, China, in this September 3, 2015 file photo. REUTERS/Kim Kyung-Hoon/Files

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BEIJING: China will ease family planning restrictions to allow all couples to have two children after decades of a strict one-child policy, the ruling Communist Party said on Thursday, a move aimed at alleviating demographic strains on the economy.
The policy is a major liberalisation of the country's family planning restrictions, already eased in late 2013 when Beijing said it would allow more families to have two children when the parents met certain conditions.
A growing number of scholars had urged the government to reform the rules, introduced in the late 1970s to prevent population growth spiralling out of control, but now regarded as outdated and responsible for shrinking China's labour pool.
For the first time in decades the working age population fell in 2012, and China, the world's most populous nation, could be the first country in the world to get old before it gets rich.
By around the middle of this century, one in every three Chinese is forecast to be over 60, with a dwindling proportion of working adults to support them.
The announcement was made at the close of a key Party meeting focussed on financial reforms and maintaining growth between 2016 and 2020 amid concerns over the country's slowing economy.
China will "fully implement a policy of allowing each couple to have two children as an active response to an ageing population", the party said in a statement carried by the official Xinhua news agency.
There were no immediate details on the new policy or a timeframe for implementation.
Wang Feng, a leading expert on demographic and social change in China, called the change an "historic event" that would change the world but said the challenges of China's ageing society would remain.
"It's an event that we have been waiting for a generation, but it is one we have had to wait much too long for," Wang said.
"It won't have any impact on the issue of the ageing society, but it will change the character of many young families," Wang said.
TOO LITTLE, TOO LATE?
Under the 2013 reform, couples in which one parent is an only child were allowed to have a second child.
Critics said the relaxation of rules was too little, too late to redress substantial negative effects of the one-child policy on the economy and society.
Many couples who were allowed to have another child under the 2013 rules decided not to, especially in the cities, citing the cost of bringing up children in an increasingly expensive country.
State media said in January that about 30,000 families in Beijing, just 6.7 percent of those eligible, applied to have a second child. The Beijing government had said last year that it expected an extra 54,200 births annually as a result of the change in rules.
Chinese people took to microblogging site Weibo, China's answer to Twitter, to welcome the move, but many said they probably wouldn't opt for a second child.
"I can't even afford to raise one, let alone two," wrote one user.
Couples who flout family planning laws in China are, at minimum, fined, some lose their jobs, and in some cases mothers are forced to abort their babies or be sterilised.
William Nee, a China researcher at human rights campaign group Amnesty International, welcomed the move, but urged China to go further.
"China should immediately and completely end its control over people's decisions to have children. This would not only be good for improving human rights, but would also make sense given the stark demographic challenges that lie ahead," he said.
CHARGING GROWTH
The plenum also announced plans to attack other structural economic challenges, covering areas such as market pricing, innovation, consumption and more private ownership of assets.
The Party reiterated its goal of doubling GDP and incomes between 2010 and 2020 - entailing a "medium-high economic growth target" - and committed to liberalising its service sector to foreign investment. It said it would accelerate implementation of free-trade zones, and intervene less in the pricing of goods and services.
However, it did not give a figure for its next five-year growth target. Chinese social media was buzzing earlier on Thursday with comments purportedly made by Premier Li Keqiang saying 6.53 percent was the mininum growth rate China needed to become moderately prosperous.
"Not a lot of new stuff," said Chang Liu, China economist at Capital Economics in London.
He noted that the commitment to put more state assets into pension funds would be a desirable way to get state money into private hands, with potential trickle-down effects on consumption, but was sceptical of implementation.
"I think that's one of the tougher ones to carry out, given vested interests."
The restated focus on innovation is getting more and more policy support as China tries to push its companies to move more quickly up the value chain.
(Additional reporting by Michael Martina; Writing by Ben Blanchard and Pete Sweeney; Editing by Will Waterman)
- Reuters

Like it or not, Chinese have a systematic approach in handling their economy. Given that China is a highly diverse nation with vast land mass and a rich history especially post Mao's cultural revolution, it is an interesting managed economy in the face of a free mkt global economy that is currently being actively managed by Central Bankers in the face of aging population, rising unemployment, extremism and high debt levels post GFCs...

China's role in this changed world order is highly critical given that free market system post the collapse of the Bretton Woods gold standard system is also facing huge challenges in the face of the above...
 

• Oct 30 2015 at 2:31 AM 
  

Li floats five-year minimum 6.5% growth target

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/i/0/6/a/image.related.afrArticleLead.620x350.gkmf3x.png/1446135846443.jpg[/img]The nation needs annual growth of at least 6.53 per cent in the next five years, Li said in a speech to Communist Party members. Getty Images
by Bloomberg News
Premier Li Keqiang highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership's readiness to accept the weakest period of expansion since the economy was opened up more than three decades ago.
The nation needs annual growth of at least 6.53 per cent in the next five years to meet the government's goal of establishing a "moderately prosperous society", Li said in an October 23 speech to Communist Party members, according to people familiar with the matter who asked not to be identified as the remarks weren't public.
Communist Party leaders Thursday conclude a four-day gathering to discuss their 2016-20 five-year plan for the nation, the first since President Xi Jinping and Premier Li took office. Policy makers are managing the priorities of both reforming the economy and keeping short-term growth fast enough so that structural changes don't cause a hard landing.
"This lower number is more realistic and feasible if substantive reforms can be implemented," said Xiao Geng, a professor of finance and public policy at the University of Hong Kong. "It is good as Li is focusing on delivering the party's key promise on raising the living standards of Chinese people. After all, growth is the best available verifiable indicator for progress."

Private economists have predicted a reduction in the five-year growth target to 6.5 per cent, down from 7 per cent in the current plan - a reflection of the Communist leadership's continuing attempts to move away from debt-fuelled expansion.
"It seems that Premier Li is sending a signal through his speech that China's government is likely to lower their growth target to 6.5 per cent in the 13th five-year plan," said Le Xia, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria. "The 6.5 per cent target is still a little challenging. A target of 5-6 per cent seems a more feasible one."
China's central bank shouldn't adopt quantitative easing to flood the economy with too much money, Li said, according to the people. The comment underscores how the People's Bank of China has opposed US and Japan-style direct purchases of assets in its campaign to ease liquidity and shore up the weakest expansion in a quarter century.
China also faces challenges including disinflation and overcapacity, while companies are facing difficulties in operations, Li said. He said policy makers need to restructure the economy to avoid the middle-income trap and not purely emphasise speed.


The State Council didn't immediately respond to a faxed request for comment on Li's remarks.
Li, speaking to the Communist Party Central Committee's Party School, underscored China's avowal to avoid cheapening the yuan as a tool to stoke exports. Recent depreciation in the currency has been a "market action", he said, according to the account. The program to bolster international use of the yuan will continue to advance, he said, while capital flows across borders have brought challenges to monitoring.
Capital outflows climbed to $US194.3 billion in September, exceeding the previous high of $US141.7 billion in August, according to a Bloomberg estimate that takes into account decisions by exporters and direct investment recipients to hold funds in dollars.
The premier said fiscal and financial risks are increasing, and that the stock-market rout suffered earlier this year was caused by leverage, such as a surge in margin financing. Growth cannot return to the days in excess of 10 per cent, though it can stay in a reasonable range, Li said.

Officials have worked hard to achieve the current target of 7 per cent, the premier said. The economy expanded 6.9 per cent in the three months through September from a year earlier. While that beat economists' estimates for 6.8 per cent, the expansion benefited from an out-sized contribution from financial services after a surge in share trading from the year-earlier period.
"Having an ambitious growth target will leave the Chinese authorities with no other option apart from undertaking widespread structural reforms," said James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology in Sydney. "Macroeconomic policy stimulus won't be sufficient to get them there."
Some private estimates of the economy indicate that the expansion may be weaker than officially reported, as gains among new services and consumer-led businesses aren't yet sufficient to offset a contraction among old-line industries.
China's goal of a "moderately prosperous society" refers to policy makers' plan to double per-capita income by 2020 from 2010 levels. Li said the country will lift most of the people currently among the 70 million living in poverty out of that condition by 2020.



Bloomberg

(30-10-2015, 06:52 AM)greengiraffe Wrote: [ -> ]Like it or not, Chinese have a systematic approach in handling their economy. Given that China is a highly diverse nation with vast land mass and a rich history especially post Mao's cultural revolution, it is an interesting managed economy in the face of a free mkt global economy that is currently being actively managed by Central Bankers in the face of aging population, rising unemployment, extremism and high debt levels post GFCs...

China's role in this changed world order is highly critical given that free market system post the collapse of the Bretton Woods gold standard system is also facing huge challenges in the face of the above...
 

• Oct 30 2015 at 2:31 AM 
  

Li floats five-year minimum 6.5% growth target

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NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/i/0/6/a/image.related.afrArticleLead.620x350.gkmf3x.png/1446135846443.jpg[/img]The nation needs annual growth of at least 6.53 per cent in the next five years, Li said in a speech to Communist Party members. Getty Images
by Bloomberg News
Premier Li Keqiang highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership's readiness to accept the weakest period of expansion since the economy was opened up more than three decades ago.
The nation needs annual growth of at least 6.53 per cent in the next five years to meet the government's goal of establishing a "moderately prosperous society", Li said in an October 23 speech to Communist Party members, according to people familiar with the matter who asked not to be identified as the remarks weren't public.
Communist Party leaders Thursday conclude a four-day gathering to discuss their 2016-20 five-year plan for the nation, the first since President Xi Jinping and Premier Li took office. Policy makers are managing the priorities of both reforming the economy and keeping short-term growth fast enough so that structural changes don't cause a hard landing.
"This lower number is more realistic and feasible if substantive reforms can be implemented," said Xiao Geng, a professor of finance and public policy at the University of Hong Kong. "It is good as Li is focusing on delivering the party's key promise on raising the living standards of Chinese people. After all, growth is the best available verifiable indicator for progress."

Private economists have predicted a reduction in the five-year growth target to 6.5 per cent, down from 7 per cent in the current plan - a reflection of the Communist leadership's continuing attempts to move away from debt-fuelled expansion.
"It seems that Premier Li is sending a signal through his speech that China's government is likely to lower their growth target to 6.5 per cent in the 13th five-year plan," said Le Xia, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria. "The 6.5 per cent target is still a little challenging. A target of 5-6 per cent seems a more feasible one."
China's central bank shouldn't adopt quantitative easing to flood the economy with too much money, Li said, according to the people. The comment underscores how the People's Bank of China has opposed US and Japan-style direct purchases of assets in its campaign to ease liquidity and shore up the weakest expansion in a quarter century.
China also faces challenges including disinflation and overcapacity, while companies are facing difficulties in operations, Li said. He said policy makers need to restructure the economy to avoid the middle-income trap and not purely emphasise speed.


The State Council didn't immediately respond to a faxed request for comment on Li's remarks.
Li, speaking to the Communist Party Central Committee's Party School, underscored China's avowal to avoid cheapening the yuan as a tool to stoke exports. Recent depreciation in the currency has been a "market action", he said, according to the account. The program to bolster international use of the yuan will continue to advance, he said, while capital flows across borders have brought challenges to monitoring.
Capital outflows climbed to $US194.3 billion in September, exceeding the previous high of $US141.7 billion in August, according to a Bloomberg estimate that takes into account decisions by exporters and direct investment recipients to hold funds in dollars.
The premier said fiscal and financial risks are increasing, and that the stock-market rout suffered earlier this year was caused by leverage, such as a surge in margin financing. Growth cannot return to the days in excess of 10 per cent, though it can stay in a reasonable range, Li said.

Officials have worked hard to achieve the current target of 7 per cent, the premier said. The economy expanded 6.9 per cent in the three months through September from a year earlier. While that beat economists' estimates for 6.8 per cent, the expansion benefited from an out-sized contribution from financial services after a surge in share trading from the year-earlier period.
"Having an ambitious growth target will leave the Chinese authorities with no other option apart from undertaking widespread structural reforms," said James Laurenceson, deputy director of the Australia-China Relations Institute at the University of Technology in Sydney. "Macroeconomic policy stimulus won't be sufficient to get them there."
Some private estimates of the economy indicate that the expansion may be weaker than officially reported, as gains among new services and consumer-led businesses aren't yet sufficient to offset a contraction among old-line industries.
China's goal of a "moderately prosperous society" refers to policy makers' plan to double per-capita income by 2020 from 2010 levels. Li said the country will lift most of the people currently among the 70 million living in poverty out of that condition by 2020.



Bloomberg

their central bank just cut interest rates. cfm downside risk .... haiz

(29-10-2015, 11:14 PM)greengiraffe Wrote: [ -> ]http://www.channelnewsasia.com/news/asia...25928.html

China adopts two-child policy
China will ease family planning restrictions to allow all couples to have two children after decades of a strict one-child policy, the ruling Communist Party said on Thursday, a move aimed at alleviating demographic strains on the economy.

• POSTED: 29 Oct 2015 19:00
   
  
  
• UPDATED: 29 Oct 2015 21:00
  

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[img=768x0]http://www.channelnewsasia.com/image/2226046/1446117624000/large16x9/768/432/file-photo-of-woman-and.jpg[/img]A woman and her baby wait on the street for a military parade marking the 70th anniversary of the end of World War Two, in Beijing, China, in this September 3, 2015 file photo. REUTERS/Kim Kyung-Hoon/Files

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BEIJING: China will ease family planning restrictions to allow all couples to have two children after decades of a strict one-child policy, the ruling Communist Party said on Thursday, a move aimed at alleviating demographic strains on the economy.
The policy is a major liberalisation of the country's family planning restrictions, already eased in late 2013 when Beijing said it would allow more families to have two children when the parents met certain conditions.
A growing number of scholars had urged the government to reform the rules, introduced in the late 1970s to prevent population growth spiralling out of control, but now regarded as outdated and responsible for shrinking China's labour pool.
For the first time in decades the working age population fell in 2012, and China, the world's most populous nation, could be the first country in the world to get old before it gets rich.
By around the middle of this century, one in every three Chinese is forecast to be over 60, with a dwindling proportion of working adults to support them.
The announcement was made at the close of a key Party meeting focussed on financial reforms and maintaining growth between 2016 and 2020 amid concerns over the country's slowing economy.
China will "fully implement a policy of allowing each couple to have two children as an active response to an ageing population", the party said in a statement carried by the official Xinhua news agency.
There were no immediate details on the new policy or a timeframe for implementation.
Wang Feng, a leading expert on demographic and social change in China, called the change an "historic event" that would change the world but said the challenges of China's ageing society would remain.
"It's an event that we have been waiting for a generation, but it is one we have had to wait much too long for," Wang said.
"It won't have any impact on the issue of the ageing society, but it will change the character of many young families," Wang said.
TOO LITTLE, TOO LATE?
Under the 2013 reform, couples in which one parent is an only child were allowed to have a second child.
Critics said the relaxation of rules was too little, too late to redress substantial negative effects of the one-child policy on the economy and society.
Many couples who were allowed to have another child under the 2013 rules decided not to, especially in the cities, citing the cost of bringing up children in an increasingly expensive country.
State media said in January that about 30,000 families in Beijing, just 6.7 percent of those eligible, applied to have a second child. The Beijing government had said last year that it expected an extra 54,200 births annually as a result of the change in rules.
Chinese people took to microblogging site Weibo, China's answer to Twitter, to welcome the move, but many said they probably wouldn't opt for a second child.
"I can't even afford to raise one, let alone two," wrote one user.
Couples who flout family planning laws in China are, at minimum, fined, some lose their jobs, and in some cases mothers are forced to abort their babies or be sterilised.
William Nee, a China researcher at human rights campaign group Amnesty International, welcomed the move, but urged China to go further.
"China should immediately and completely end its control over people's decisions to have children. This would not only be good for improving human rights, but would also make sense given the stark demographic challenges that lie ahead," he said.
CHARGING GROWTH
The plenum also announced plans to attack other structural economic challenges, covering areas such as market pricing, innovation, consumption and more private ownership of assets.
The Party reiterated its goal of doubling GDP and incomes between 2010 and 2020 - entailing a "medium-high economic growth target" - and committed to liberalising its service sector to foreign investment. It said it would accelerate implementation of free-trade zones, and intervene less in the pricing of goods and services.
However, it did not give a figure for its next five-year growth target. Chinese social media was buzzing earlier on Thursday with comments purportedly made by Premier Li Keqiang saying 6.53 percent was the mininum growth rate China needed to become moderately prosperous.
"Not a lot of new stuff," said Chang Liu, China economist at Capital Economics in London.
He noted that the commitment to put more state assets into pension funds would be a desirable way to get state money into private hands, with potential trickle-down effects on consumption, but was sceptical of implementation.
"I think that's one of the tougher ones to carry out, given vested interests."
The restated focus on innovation is getting more and more policy support as China tries to push its companies to move more quickly up the value chain.
(Additional reporting by Michael Martina; Writing by Ben Blanchard and Pete Sweeney; Editing by Will Waterman)
- Reuters

• Oct 30 2015 at 4:04 PM 
  

[*]
Policy change may not bring baby boom

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[*]

NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/k/m/m/a/a/image.related.afrArticleLead.620x350.gkmrnr.png/1446184535417.jpg[/img]China has changed since 1980 when the one-child policy was formally introduced to hasten economic development and reduce poverty. Erin Jonasson
by Lisa Murray
For the first time in more than three decades, all Chinese parents will have a choice. They can decide, unencumbered, if they want to have a second child.
The biggest [url=http://www.afr.com/news/world/china-scraps-onechild-policy-20151029-gkmfpe]social experiment in human history is finally being unwound but don't expect a baby boom.
China has changed since 1980 when the one-child policy was formally introduced to hasten economic development and reduce poverty. Draconian family planning controls are not the only consideration for couples looking to expand their families.
Wealthier and more educated than their parents, Chinese couples now weigh up the cost of raising a second child, the time and effort required to ensure they are accepted into a good school and the extra care that will be needed at home if both decide to return to work.

These considerations are what has kept the birth rate in Taiwan, which has no restrictions, at around 1 for the past six years - among the lowest in the world. And they are likely to mute any response to the new two-child policy announced on Thursday night.
Still, most demographers do expect a bump. Under the current system, more than 16 million babies are born every year. Estimates of the new policy's impact range from one million to eight million additional births a year.
Liang Jianzhang, an economics professor at Peking University, expects there will be another 2.5 million babies born a year and that will boost spending by an annual 75 billion yuan ($16.7 billion) as parents splurge on everything from infant formula to baby prams. 
UBS says that if China manages to increase the birth rate from the current 1.2 per cent to 1.4 per cent a year and sustain it at that rate, it would significantly slow the country's aging process. Population would peak at close to 1.6 billion people around 2050 instead of 1.4 billion around 2025 to 2030.


However, there is a big question mark over whether any bump in the birth rate will be sustained.
Zuo Xuejin, a demographics researcher at the Shanghai Academy of Social Sciences, says the long-term trend is for a decline. That means China's demographic challenges still loom large.
The working-age population shrank last year for the first time in two decades. On the latest figures, about one-tenth of the population is now aged over 65, and that proportion is expected to double by 2035.
There is concern this week's change may be too late to address these challenges in a meaningful way.

But that doesn't diminish the significance of the announcement. It will be a hugely popular policy change for which President Xi Jinping will be given most of the credit.
It dismantles the bloated and powerful bureaucracy that has built up around the family planning regulations. It may help correct a worrying gender imbalance that has developed as some couples took measures to ensure they were having a son. And it goes some way to reducing the role of the government in people's lives.
How the one-child policy will be remembered over time will vary greatly. Its advocates will argue it reduced the world's population by hundreds of millions, alleviating poverty and lessening the strain on the environment.
But many Chinese people will remember it as an unwanted and sometimes brutally enforced government control on their right to determine the size of their family. And they will no doubt push for the removal of all remaining restrictions as soon as possible.
 

China: look through the economic volatility, urges Geoff Raby

• THE AUSTRALIAN
  
• OCTOBER 31, 2015 12:00AM
  

Damon Kitney
[Image: damon_kitney.png]
Victorian Business Editor
Melbourne

[Image: 806729-80452c84-7eb5-11e5-9ebf-df2290582775.jpg]
Former Ambassador to China Geoff Raby in Hobart. Picture: Nikki Davis-Jones. Source: News Corp Australia
[b]Former ambassador to China and company director Geoff Raby says Australians should stop worrying about the machinations of Chinese sharemarkets and “just chill’’ generally about the slowdown in China’s economy.[/b]
Speaking on the sidelines of the Finance and Treasury Association Annual Congress in Melbourne, Dr Raby said Australians too often overreacted to big falls in China’s sharemarkets considering they remain relatively unconnected to the real Chinese economy. “Capital is not raised on the stock exchanges in China, unlike here. It will have a minimal impact on firms. It can have an impact on consumer wealth and wellbeing, but it is pretty small. We always overreact to these things,’’ he said.
“What matters is the aggregate rate of economic growth in China. The sharemarket is irrelevant. The sharemarket is not connected to the international markets either. Except that if it goes wobbly, for some mad reason analysts around the world say ‘sell’. It is an emotive response.”
Dr Raby — who was ambassador to China from 2007-2011 and is now on the board of Fortescue Metals — added: “On a lot of stuff, we should just chill about China.’’
He noted that the reduction in growth that had come with the transition of the Chinese economy from being investment to consumption driven was nothing to be alarmed about.
Dr Raby, also a director of Yancoal and vice-chairman of Macquarie Group in Greater China, was one of the original architects of the China Free Trade Agreement, which was finally supported by Labor earlier this month. “It (the FTA) is an incredible and well-worth doing exercise. It is also head-turning. It has caught people’s attention, especially in the elite,’’ he said.
“It puts the senior Chinese leadership’s imprimatur on the Australian relationship.’’
While noting the agreement was unquestionably positive for Australia, he stressed it would take up to eight years to eliminate our disadvantage within the Chinese market against countries like New Zealand and Chile that have had FTAs with China in place for several years. “The good news in the case of New Zealand is that the supply side is so limited. So once we get onto a level playing field, we should swamp them.
“What the FTA does is give a very clear signal that the services sector is an area China wants us to participate in.”
Analysts have talked up the opportunities for Australian companies to harness the rapidly growing levels of Chinese outward investment but have noted that the greatest constraints to higher levels of settlement in China/Australia trade in the ­Chinese currency of the remimbi still lay at China’s end.
Mr Raby said that while RMB invoicing would allow corporate Australia to tap into surplus Chinese mainland funds, only some companies would benefit. “Companies that have a large amount of their trade with China and source a large amount of their inputs from China and don’t have debt obligations in US dollars.”