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 liberalization 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the rules, introduced in the late 1970s to prevent population growth spiraling out of control, but now regarded as outdated and responsible for shrinking China's labor pool.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 focused 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 aging 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.
Australian National University economist Dr Jane Golley said she expects the fertility rate in urban areas to rise, but not substantially.
"Many people choose to have one child", she said, " because the costs of raising them, both financially and timewise, are so huge "
"One friend recently told me that her nanny had saved up 30 thousand renmimbi to pay for after-school tutoring for her only child. At the current exchange rate, that's in the realm of 6 to 7 thousand dollars. How someone can afford to do that - times two or more - just defies belief, really."
From an economic standpoint, Dr Golley says relaxing the one-child policy is not the best way to tackle an ageing population.
"What you've got is rising age dependency, the number of old people in the population relative to the number of workers. But have lots more children, and you create a youth dependency problem. These kids obviously - we hope - aren't going to be contributing to the workforce for some 15 to 20 years. So the idea that they can come in and relieve the ageing problem is a long way off."
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 aging 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 aging society, but it will change the character of many young families."
Shares of baby formula makers such as Mead Johnson Nutrition Co and Danone SA rose on hopes for a surge in demand, although one analyst warned against an over-reaction.
"We would expect that this would have a positive impact on our pediatric business in China, assuming an increase in births," said Scott Stoffel, a spokesman for Abbott Laboratories, the maker of Similac formula, which gets 10 percent of its global nutrition sales from China.
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 sterilized.
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.
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 liberalizing 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 skeptical 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.