South Korea is the latest country trying to encourage more births and stem demographic declines being seen across the region, including in China. 

An increasing number of countries in Asia look like they are headed straight into the dreaded middle-income trap, including China, and many of them are increasingly resorting to family subsidies as a way of maintaining growth and preventing further demographic decline.

The latest is South Korea, according to the «Bloomberg» (paywall) news service, where a government proposal released Tuesday plans to provide a substantial $740 monthly allowance for newborn children to address the economic challenges posed by having the world's lowest fertility rate.

But they are not alone. According to World Economic Forum statistics, China's population is set to sink for the first time since the cultural revolution 60 years ago and it may be a key reason why the mainland government surprisingly announced a three-child policy and additional family support measures in 2021, as reported then by the country's news agency, Xinhua.

No Fines

What may even be most surprising in that announcement is the fact that they indicated that families who had more than three children would not be fined, a big U-turn from the strict one-child policy in place for 35 years until 2016, when it was finally scrapped.

In all this, it would be amiss to forget the region's elder statesman of demographic decline, Japan, which has been fighting a falling population and low fertility rates since the 1970s by some accounts, at least according to a Deep Dive audio program by that country's English language newspaper, the Japan Times.

But how significant are these developments? Do they somehow indicate a premature end to the so-called Asian century now that many countries in the region are exhibiting many of the same ills as their more developed, fully industrialized counterparts?

Top 10

That is a very clear possibility, given that family support measures tend to have a short-lived impact at best, according to the «New York Times» (paywall).

World Bank statistics indicate that four Asian countries make the list of the top ten countries with the lowest fertility rates − South Korea, Singapore, Hong Kong, and Macau − the last two likely serving as euphemistic canaries in the coal mine for China itself.

What is surprising in all this is that Europe, until recently considered the sleepwalking dead of demographics, also only has four entrants in the top ten (Malta, Spain, Italy, and Bosnia and Herzegovina), with Puerto Rico and Ukraine making up the remainder.

Middle Income Trap

That brings us back to the question of the middle-income trap and the future of the Asian century. The same statistics show that fertility rates progressively decline as countries move up the income ladder, with the average for countries at the low end of the scale was 4.5 in 2020, 2.3 in the middle, and 1.5 at the top (The World Resources Institute maintains that a rate of 2.1 is generally needed to keep a population stable in most countries).

China, the region's largest economy, is still a middle-income country in per capita GDP terms but its fertility rate, at 1.7, is only marginally above that of the high-income average indicated in the statistics and already well below the level needed to keep its population from falling.

Surprisingly, many of the Group of Seven industrialized economies have comparable or better fertility rates. The US and the UK are at 1.6, while France is at 1.8. In stark contrast to China, however, they typically have been able to buffer the impact of demographic decline in the past from high rates of mass economic immigration, fraught as the issue may be.

No Workers

That is an avenue that all countries in the region have typically refrained from taking. In effect, that means that three of the four largest economies in the region, according to IMF statistics, will have to find ways to grow despite having fewer workers for the foreseeable future.

All of that seemingly puts the Asian miracle on tenterhooks in the short, medium, and long term.

The region traditionally relied on posting average growth rates far in excess of the G-7, but that now seems to be a very tall ask, particularly given that any economic growth for everyone will be hard to come by in this post-pandemic age of elevated inflation, geopolitical conflict, and supply chain constraints.