Impact of the changes to China's One Child Policy
25-Nov-15, Global Demographics
On the 29th of October 2015, China changed its One Child Policy such that all married couples irrespective of their Hukou (Certificate of residency) could now have two children. This is actually a continuation of the relaxation that started in 2013 when it was revised so that couples where either parent was from a one child family could have a second child.
With 363 million women of child bearing age the obvious question is what will the implications of this be for the future population of China?
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Image: Time
It will lift births in the near term by 5.4 million per annum and this increment will reduce to 2.6 million by 2035. It is lower than many expect for the simple reason that already nearly half the married couples of child bearing age have two children.
In addition, there is a definite declining propensity to have more than one child even when the option exists – a function of expense and life style choice. Finally, there is the impact of the ‘ageing profile’ of women of child bearing age.
Implications for companies and investors:
1. The total number of births increases by 38% in 2016, which clearly benefits companies whose products or services are aimed at the baby/young child market.
2. However it has little impact on the overall population. Whereas total population would have peaked in 2024 at 1.39 bn it is now expected to peak in 2031 at 1.468 bn.
3. It has virtually no effect on the size of the labour force. The reason for this is that educational opportunities are improving in China and by 2035 entry to the labour force will be delayed with the children born in 2016 continuing to vocational or higher education.
4. As a result, there will be no significant increase in the total GDP of the country before 2035. In fact, it might actually decline as the propensity for one parent to stay home increases.
5. It will impact spending and savings. The additional children contribute nothing to the household income, but do involve additional expenditure.
6. It will not cause significant changes in the size of life cycle segments. The important ‘Youth’ consumer group – 15 to 24 years of age – is not impacted until 2021.