Save articles for later
Add articles to your saved list and come back to them any time.
James Liang is running an experiment. The leader of one of the world’s largest travel agencies believes we are running out of time and people.
“I think this is probably the biggest problem the human race faces post-industrialisation,” he says.
James Liang, the chief executive of trip.com.
Liang, the 53-year-old chairman of the trip.com group, who has a PhD in economics from Stanford, believes the collapse in fertility across Asia and the West will shrink markets, restrict innovation and hobble economies.
“Over the long run, it is a global problem that people in general will be less interested in family, marriage and having children,” he says. “The whole world has to find the solution to that problem.”
Nowhere is the phenomenon more entrenched than in Liang’s home country of China, where the business executive turned academic has become so frustrated by the Chinese government’s lack of action that he has started paying his employees to have babies.
In June, his company announced it would pay 50,000 yuan ($10,000) for each child they have from July 1. It would also pay a parental cash subsidy of 10,000 yuan ($2150) every year for five years for every child. The company said the program would cost about 1 billion yuan ($215 million).
Liang, in his first interview since the announcement, says it is difficult for companies to solve a problem that should have been solved by the government.
“I mean just look at your standard economics theory. It really should be the central government who corrects what we call the negative externality,” he says, referring to when the social costs of policies outweigh the private costs.
“I think companies providing a modest amount of support for babies and for a working family environment is also not a bad thing to do.”
For a top Chinese business executive, Liang is unusually direct in his criticism of the government. Others have fallen foul of Beijing for speaking out on policy issues, let alone implementing policies worth 1 billion yuan, but he believes the fertility crisis in China is now so urgent that radical change is needed.
China’s birth rate has fallen to historic lows.Credit: National Bureau of Statistics, China
“We need a control group to really prove or to convincingly show that it has an effect,” he says.
Liang, a demographer who still helps run the $5 billion company that he founded, was always on a path where his decades of research would inevitably collide with some of his corporate interests.
The trip.com group is headquartered in Shanghai and has been listed on the NASDAQ since 2003. It has 45,000 employees and 400 million members, many of them in China, where it is the country’s largest travel agency. But it also has a substantial footprint around the world, including in Australia, where many users book flights through one of its subsidiaries such as Skyscanner.
“Unusual career history, right?” a relaxed Liang says over Zoom from an undisclosed location.
“I started my tenure as CEO, I took a few years off to get a PhD in economics from Stanford. My research area was innovation and, while I was looking at innovation, I found that demographics is one of the big factors.”
Liang grew up in China during the one-child policy. “It was a hugely unproductive event,” he says of the policy that inflicted trauma on millions of families over decades and that Chinese authorities are now struggling to reverse.
“So that’s why I was really concerned and tried to influence that policy point of view.”
The reason he believes the United States has been successful at producing groundbreaking companies for a long time is partly because of its relatively young population that generated ideas.
During its 40-year boom from the 1980s onwards, China also surged on the back of its huge population, driving massive corporations such as Alibaba, Tencent and Huawei to become some of the biggest in the world by the 2000s.
China has struggled to shake off the one-child policy.Credit: Sanghee Liu
“If you just look at the demographic impact from a labour supply perspective, having a [smaller] population is not a big issue. You just have automation and fewer workers,” he says.
“But if you have fewer innovators, it could be a very important disadvantage. Demographics are increasingly a factor in fostering innovation. This is the economic phenomenon that’s been overlooked.”
China is already grappling with a series of short-term post-COVID threats: a stagnating economy, deflation and a falling property market.
Liang believes all three can be linked to fertility rates, which fell to 1.09 last year, according to a study by a unit of China’s National Health Commission. That is one baby for every two people, well below the 1.26 recorded by the ageing economy of Japan but above the record-low of 0.7 in South Korea. Australia’s fertility rate is 1.7, but it is mostly driven by immigration – a boost that many ethnocentric countries in Asia are yet to contemplate.
The majority of young Chinese say they do not want to have children, according to a recent survey.Credit: Sanghee Liu
“This will be a very serious long-term problem for the Chinese economy,” he says. “Not so much for the travel industry – people can travel in their 60s and 70s, so it will be a much-delayed response – but other industries will be affected.”
Liang rattles off the impacts. The peak age for buying cars and houses is for consumers in their 30s. A very low fertility rate today will affect the demand for those items in 30 years. It takes 20 years for a child to be educated. When they begin work in two decades, they will start in a shrinking workforce.
“And if you are thinking about building a house, or investing in a real estate project, it will take a few years to build it, and then you want to be able to sell your apartments to the customers who think they will be able to rent it out for the next 50 years,” he says.
“So that will again affect people’s expectations for investing.”
Liang worries the window for China to reverse its population decline is closing.
“It’s not political. It doesn’t matter if you’re a party member or not a party member if you’re looking to solve this problem. I hope more experiments can be tested around the world to solve this.
“It’s not just people getting richer and having a declining fertility rate. There are a few exceptions like Scandinavian countries. So, it’s not a completely unsolvable problem.”
In Sweden, new parents can take up to 16 months of parental leave at up to 80 per cent of their salary for the first year. In Denmark, parents can take up to a year of paid parental leave, earning a maximum of $1000 a week. The policies have delivered above-average birth rates to Scandinavia for decades, but even those rates are now slowing as its populations become denser.
Liang says as a start the Chinese government should follow trip.com’s lead.
“Obviously, the right thing to do is to give families a significant subsidy,” he says. “Usually, the government should worry about inflation but, right now, China is not in inflation, it is in deflation, so you can catch two birds with one stone.
“In the medium term, I would like to see more companies follow what we did in terms of providing a family-friendly environment. And in the long run, I would like to see education reform. Even compared to 30 years ago, the curriculum stays the same, but the efficiency is a lot lower.
“The cost and the time that is being put into children’s education, that’s an even bigger factor contributing to the decline of fertility.”
Trip.com’s annual subsidy of 10,000 yuan is about a fifth of the cost of raising a child in a major Chinese city. Education and other costs soared under the one-child policy as families raced to put their children ahead of their classmates.
“The cost of raising a child in China is one of the highest in the world, probably second only to Korea,” says Liang.
The Chinese government attempted to ban private tuition over weekends and holidays in 2021 to put a lid on growing costs, but it created a booming network of underground tutors who continue to operate.
There is the risk that trip.com’s subsidy could push up prices further in an already overheating market, but he believes the costs of not acting would be worse.
“You could call it symbolic and that’s fine,” says Liang. “But it has a signalling effect. I would like to see if more companies follow and policymakers take notice.”
Get a note direct from our foreign correspondents on what’s making headlines around the world. Sign up for the weekly What in the World newsletter here.
Most Viewed in World
From our partners
Source: Read Full Article
