Hong Kong's declining fertility rate and aging population have aroused much concern. A comprehensive policy is needed to tackle the challenges arising from these problems in order to encourage childbirth. Experts say the SAR government should examine all relevant factors to create an environment that is conducive to raising children. Oswald Chan reports from Hong Kong.

It will be one of the biggest moments for Zhang, a Hong Kong-based journalist, when she walks down the aisle next month.

She will tie the knot with her fiance - a Hong Kong permanent resident who is a university professor in the special administrative region. Both are from the Chinese mainland, and have chosen to settle down in the city after marriage.

But, they have yet to decide whether or not to have children. "We have to consider a bundle of factors, and money is just one of them. We also need to see if we have the time and resources to take care of children as this is a major decision in life," Zhang tells China Daily.

"I do not think the government, by offering a mere cash bonus, could induce couples to raise children," she says.

Zhang and her fiance have bought an apartment in the SAR, and the government's plan to give priority to families with newborns in purchasing subsidized housing should not be a major factor in influencing their decision about whether or not to have children.

But she stresses that the government's proposal to extend afterschool care programs for pre-primary children, and strengthen home-based childcare services should be useful if she decides to raise children. "Our parents live on the Chinese mainland, and it would be difficult for them to help us take care of our children in Hong Kong."

Zhang's concerns reflect a typical phenomenon in Hong Kong society, where a plethora of economic, social and cultural factors are at play, leading to a low childbirth rate. These include delayed marriages; soaring childrearing costs; increased opportunity costs of childrearing as education standards go up; the psychological and social pressure of bringing up children; as well as gender inequality that has placed childcare responsibilities mostly on women.

Hong Kong's fertility rate fell to 0.77 births per woman in 2021 - far below the natural population replenishment rate of 2.1 per woman - and was among the lowest in the world.

Government incentives

The SAR government is aware of the severe implications a low fertility rate and a graying population could have on the city's long-term economic growth. To reverse the spiraling downward trend in the fertility rate, Chief Executive John Lee Ka-chiu's 2023 Policy Address came up with a slew of measures, including an unprecedented one-off cash incentive of HK$20,000 ($2,557) for each child born in Hong Kong in the next three years to a parent who is a permanent resident.

From the next financial year, the government will raise the tax cut ceiling for housing to HK$120,000 for families with newborns until the child reaches the age of 18, in order to lighten the financial burden on families raising children. Parents with newborns will also get priority in purchasing subsidized flats, or in the allocation of public rental units.

In social welfare services, household and child allowances under the Working Family Allowance program will be increased by 15 percent from April next year; the number of childcare centers and allowances will be raised; afterschool care programs for pre-primary children will be extended; and incentive payments for home-based child-carers under the Neighbourhood Support Child Care Project will go up.

"Granting a one-off cash bonus of HK$20,000 will be attractive for low-income families. But, for middle-class and wealthy families, childbirth depends on a host of factors, not just childrearing costs," says Billy Mak Sui-choi, associate professor at Hong Kong Baptist University's Department of Accountancy, Economics and Finance.

He thinks it is difficult to gauge the impact of the proposed measures at this stage because "the policy effectiveness of encouraging childbirth does not only involve financial incentives, but also depends on whether other measures on housing, taxation and social welfare services can subsequently benefit parents if they choose to raise children".

Relieving labor shortage

The professor contends that Hong Kong's continued low fertility, combined with an aging and depleting workforce, would have serious implications for the city's long-term economic growth.

"Hong Kong's low fertility rate will lead to a shortage of talent and labor, as well as escalating labor costs in the future. This is particularly unfavorable if we want to develop smart city technologies and the service economy where adequate talent and labor supply are needed," says Mak.

"As labor costs continue to soar, they will push up production costs, making Hong Kong products and services uncompetitive in the international market, hence trimming our competitiveness in the long run. It will then become a vicious cycle. With insufficient talent and labor, business opportunities will be gone, and companies will be more hesitant in hiring workers. To break this dangerous cycle, the talent and labor shortage problem must be addressed first."

According to a report by US credit agency Moody's Investors Service in July, the Hong Kong SAR, the Chinese mainland, Japan, Singapore, South Korea and Taiwan will see rapid increases in the number of people aged 65 and above, as well as big declines in their working age populations, in the next two decades.

The report warned that an aging population will hinder growth prospects and public finances for Hong Kong and the other five economies by trimming gains in productivity, workforce participation or the quality of available labor.

"To be honest, no one would seriously consider childrearing just because of the HK$20,000 cash bonus. Yet, this initiative shows the government recognizes the severity of the low fertility problem. The community expects the administration to roll out further measures to alleviate the burden of childrearing," says Paul Yip Siu-fai, associate dean and chair professor at the University of Hong Kong's Faculty of Social Sciences.

"The SAR administration recognizes its commitment to, and leadership in, tackling declining fertility. But, the effectiveness of the proposed policies needs to be evaluated. Unfortunately, at this moment, the support is quite limited, so the expected impact of the initiatives will also be restricted," he says.

An inclusive environment

Providing financial incentives is just a part of the panacea. More importantly, the government should create a family-friendly and inclusive social environment that is conducive to childrearing.

Yip says he believes a more gender-equal society should be created, with husbands and wives sharing their household burdens equally. The government should help provide a family-friendly working environment with flexible working hours and working space. This could induce private enterprises to follow suit, thus lifting the fertility rate, as well as increasing the number of women participating in the workforce.

To induce more elderly people to work, Yip suggests the government subsidize a portion of the insurance premium payments for companies in employing people aged 65 or above. It should also take the lead in dismantling discrimination against elderly workers, and offering them diversified job opportunities.

He adds that Hong Kong should leverage and invest in automation and robotics technologies to enhance labor productivity by substituting manual labor in labor-intensive and repetitive jobs.

Moody's Investors Service expects Hong Kong to make material gains in workforce participation to achieve potential growth rates of about 2 percent between 2021 and 2030. It warns that the workforce participation rate among the elderly in the SAR is trailing those of the Chinese mainland, Japan, South Korea and Singapore. Hong Kong should further ramp up technological adoption in automation and robotics technology to strengthen labor productivity.

A broader policy

Yip emphasizes that Hong Kong must formulate a comprehensive population policy to tackle the demographic challenges of a falling fertility rate and an aging population. "The government has to enforce a comprehensive policy, taking into account all the relevant factors in depth and in breadth, and in a forward-looking manner. It needs to monitor the long-term changes in the population trend, provide improvement measures that are evidence-based, and improve the education system that can be aligned with the diversification of the job market."

He notes that, in overseas countries, the head of state may have to draw up population policies. Hong Kong can show stronger leadership and do more in coordination work when formulating its own policies.

The SAR government set up the Human Resources Planning Commission in 2018. The unit, led by the chief secretary for administration, aims to consolidate the resources and the efforts of the government and various sectors to examine, review and integrate regulations and measures on human resources in a holistic manner, for developing Hong Kong further into a high value-added and more diversified economy.

Contact the writer at oswald@chinadailyhk.com