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At least once a year, the same rumour circulates: China is about to do away with its 30-year-old one-child policy.

By the time the rumour finally becomes fact, it may make little difference to the birth rate in China, which has fallen so much that a shortage of young workers is already threatening mainland economic development, according to demographic experts. But it will make a big difference to women who, under the policy, are subjected to forced abortions.

Feng Jianmei is one of those women. In June last year, she was forced to abort her seven-month-old foetus, and pictures of her lying next to the small, bloodied corpse went viral in China and around the world.

Most people in China do not support forced abortions and the Feng Jianmei incident provoked an outcry on Chinese social media sites
. Just before November’s leadership transition, a six-months pregnant mother of two in northern China’s Shandong province was bundled into a van, driven to a hospital and subjected to a chemically induced abortion, according to All Girls Allowed, a US anti-abortion group. The woman’s husband told the group that government officials later paid him Rmb40,000 ($6,400) in compensation, perhaps fearing the news could cause controversy before the transition.

No one knows how many women have been forced to abort late in their pregnancies since the one-child policy took effect in 1979, because no statistics are published. Demographers believe that recently the number has not been high because most officials prefer to fine couples after births rather than attract attention to a forced abortion – though forced abortions in the first trimester are common. But the difference in Feng Jianmei’s case was the existence of photographic evidence, which was widely circulated online – and, crucially, the fact that local media were allowed to report the incident.

“There has been no change in the one-child policy,” says He Yafu, a Chinese demographer, “but [the Feng Jianmei case] was a turning point in terms of media coverage. Before, the media was not allowed to report [such cases] but this one was widely reported.”

Perhaps unexpectedly, most people in China support the one-child policy, according to a 2008 survey by the Pew Research Centre
, which found more than three in four Chinese were in favour. Yet despite this, most Chinese demographers believe it is only a matter of time before the policy will be changed, “but we have been waiting for the other shoe to drop for a long time already”, says Cai Yong, a demographic expert at the University of North Carolina, currently a visiting scholar at Fudan University in Shanghai.

There is plenty of circumstantial evidence that the government is seriously considering altering what is referred to as the one-child policy – though there are so many exceptions that many demographers call it “the 1.5-child policy” (second babies are permitted where both spouses are only children, where a rural couple’s first child is a girl or handicapped, and for ethnic minorities).

Recently a powerful government think-tank, the China Development Research Foundation, urged Beijing to allow two children for every family by 2015, according to the state’s Xinhua news agency.

“China has paid a huge political and social cost for the policy, as it has resulted in social conflict, high administrative costs and led indirectly to a long-term gender imbalance at birth,” Xinhua quoted the report as saying.

But Mr Cai points out that any decision to scrap the policy would be taken by politicians, not think-tank experts. And Mr He says there are significant bureaucratic obstacles to its removal: “The Family Planning Commission maintains it is not in the national interest, but purely in the interest of their department, which would otherwise cease to exist.”

Perhaps the most telling recent prediction came when state media interrupted normal broadcasting to announce that China’s first Nobel Prize for literature had been awarded to Mo Yan, whose latest book portrays a rural doctor who conducts abortions to enforce the policy. Many millions of Chinese will read his books, doubtless fuelling public debate about the worst aspects of the policy.

Most demographers think that it would be too late to avert a demographic crisis in China even if the policy were to be changed tomorrow. The slowdown in births has already led to a dramatic rise in the ratio of pensioners to young workers needed to support them. According to the 2010 census, the number of people over the age of 60 has risen to 13.3 per cent of the population compared with just over a tenth a decade ago; children under 14 comprise less than one-sixth of the population, down from almost a quarter 10 years ago.

And there is scant sign that most Chinese would begin having large families when and if the policy is abolished. According to the most recent figures from the National Bureau of Statistics, the estimated 2011 birth rate among women aged 20-29 was only 1.04 – though there is likely to be some underreporting – and in 2010 the overall birth rate in cities was only 0.88.

Rising affluence tends to lower birth rates in the developing world, but the policy has so thoroughly penetrated the national psyche that millions of Chinese who are permitted to bear a second child choose to have one or none at all. Perhaps proponents of the policy will finally declare victory and withdraw – before they are embarrassed by any more images of bloody foetuses circulating on the internet.

The Chinese economy started 2013 on a solid footing, according to surveys that showed moderate growth in its manufacturing sector last month.

The official purchasing managers’ index, a gauge of the industrial sector, came in above the midpoint of 50 for a fourth straight month, signalling a sustained expansion in activity. Although the PMI edged down to 50.4 in January from 50.6 in December – an indication of slightly slower growth – analysts said China remained on course for a mild recovery after a sluggish 2012.

A separate PMI for China published by HSBC reinforced that view, rising to a two-year high of 52.3 in January from 51.5 in December. The official PMI is generally seen as reflective of state-owned companies, while the HSBC version is a better proxy for the private sector.

Analysts said Chinese growth was set to accelerate in the first half of 2013 after slowing to 7.8 per cent growth in 2012, its weakest year in more than a decade.

“In general we think the rebound is on track but the rebound seems to be quite modest,” said Ding Shuang, an economist with Citi.

China’s property market is also beginning to heat up. Home prices rose 1 per cent in January, the biggest increase in two years, SouFun, a top real estate website, said on Friday, based on its survey of 100 cities.

Investors were buoyed by the signs of vigour in the Chinese economy. The Shanghai Composite, China’s main stock index, climbed 1.4 per cent, building on its 20 per cent rally over the past two months.

The official PMI index for new orders increased to 51.6 in January from 51.2 in December, but the category for exports dropped to 48.5 from 50. That divergence indicates that external demand is sluggish, and that domestic demand is the main driver of growth.

Analysts cautioned against reading too much into the PMI numbers because economic data in China is always heavily distorted at the start of the year. With the country set to celebrate its lunar new year festival in early February, companies have already started scaling back production and tens of millions of workers have begun their annual mass migration from their factories and city jobs back to their rural homes.

“The PMI is a quite inaccurate barometer around the Chinese New Year holiday,” said Lu Ting, an economist with Bank of America Merrill Lynch. “We believe the Chinese economy and its related asset markets will remain in a sweet spot in the near term.”

Additional reporting by Emma Dong

©Bloomberg

Caterpillar: upbeat about its latest joint venture

Even as Caterpillar, the US-based machinery maker often seen as a barometer of economic activity, predicted continued global economic weakness in the first half of the year and cut its own revenue forecast, the company said it sees stronger GDP growth in China in 2013.

In an outlook that “assumes the Chinese government will maintain pro-growth policies throughout 2013,” Douglas Oberhelman, chief executive, told analysts Caterpillar predicted growth near 8.5 per cent on the mainland. The International Monetary Fund forecasts 8.2 per cent.

“It’s not going to be a 2010-2011 boom in China, but [rather] an improvement from this year that should be good for commodity prices and as important it should be better for commodity demand,” said Mike DeWalt, chief comptroller.

Increased activity in China, which grew at 7.9 per cent in the quarter ending in December, will help boost Caterpillar sales in Australia and South America, among other places that supply China with natural resources, Mr DeWalt said.

Announcing worse than expected fourth-quarter results, the world’s largest maker of earthmoving equipment by revenues forecast full-year 2013 revenues of $60bn to $68bn, compared with the $62.7bn to $69.3bn range it had earlier forecast.

Caterpillar, which generates some two-thirds of its revenue outside of North America, said the lowered revenues range “reflects the level of uncertainty we see in the world today”.

Fourth-quarter earnings came in well below analyst expectations, and less than half of those during the same period last year, reflecting the same weakness in the global economy that Caterpillar said was likely to continue into 2013.

For the quarter ended in December, the company said net income fell to $697m, or $1.04 per share, from $1.55bn, or $2.32 per share, a year earlier. Analysts had forecast earnings of $1.70 per share.

Earnings were also hit by a charge of $580m, or $0.87 per share, in the fourth quarter after Caterpillar discovered alleged accounting misconduct at a Chinese company it acquired last year.

The $886m purchase of ERA Mining Machinery in June represented Caterpillar’s latest attempt to crack China’s annual $64bn machinery market, which is dominated by local companies.

Earlier on Monday, Emory Williams, the former chairman of ERA, said he was surprised by the $580m writedown. Mr Williams said in a statement via email: “We were especially surprised by this situation as we co-operated very closely with the Caterpillar team during their extensive due diligence.”

On Friday, Caterpillar reported that the fourth quarter had seen the first decline in retail machine sales in more than two and a half years, on a slowdown in demand from Asia and North America.

Global machine sales fell 1 per cent during the fourth quarter compared with the same period a year earlier, according to a filing with the Securities and Exchange Commission. A 7 per cent drop in Asia-Pacific sales and a 6 per cent drop in North America sales drove the fall.

The company’s power systems business also saw a 2 per cent decline in global retail sales.

For the fourth quarter, total revenues were down 6.8 per cent, to $16.1bn, compared with $17.2bn in the same period a year earlier, and matching expectations of $16.1bn.

The drop in revenues was driven by a 13 per cent drop in sales in North America, and a 5 per cent drop in sales from the Europe and Middle East division. Revenues from the construction sector fell 25 per cent.

Caterpillar said dealers had reduced new machine inventories by about $600m during the quarter, compared to an $800m increase during the same quarter in 2011.

Adam Fleck, analyst at Morningstar, said he was encouraged by the company’s China outlook and its view that over 1m new homes will begin construction in the US this year – the most since 2007.

“That’s going to help Caterpillar, especially as the US mining market continues to suffer,” Mr Fleck said. “That’s probably going to help offset some of that [mining weakness] in North America.”

Shares were up 1.96 per cent to $97.45 by the close.