Now, with the end of the one-child policy, China is facing a pivotal moment of change as a country. China is now seeing a decline in its working-age population, facing a decrease in its growth rates and finding a need to transition to a consumption-based, innovation economy from one based on investment and exports. To understand why China has ended the policy, just look to the repeatedly asked question: "Will China get old before it gets rich?" The question suggests a false tradeoff, but reflects the reality that China's working-age population is set to fall over the next few decades cutting into growth.
The one-child policy created several unintended consequences that have been distorting the Chinese economy. For example, China's limited social safety net meant that young Chinese face a lifetime of savings to care for themselves, their parents and their grandparents. And a Confucian preference for male offspring has led to a huge gender imbalance and a marriage market in which men and their families are in a financial savings arms race to attract a smaller potential pool of wives. As a consequence, China has one of the highest savings rates in the world, creating a massive over-investment headache. Much of this money has been plowed into over-investment in infrastructure, real estate and the stock market — all facing bubbles to a certain extent.