Friday, November 15, 2013

Economy: China - The Multi Decades Stimulus Program

(Drivebycuriosity) - Finally, China announced an end to their "one-child-only" program. Today the government in Beijing declared "that couples can have two children if either parent is an only child" (bloomberg). Because the rule was implemented in the year 1979 couples who are both around 35 years old or younger will be allowed to have a second child. In five years this limit will have climbed to around 40 years.

The "one-child" rule had reduced the numbers of births in China considerably. This was intended because China was still a poor country in the 1980s. But now this policy isn`t approbate any more because China´s economy is fast growing and the country became a global economical super power. 

The rule also had reduced the proportion of female births drastically thanks to the unfortunate obsession with male heirs. The low number of female infants had reduced China´s population growth drastically  leading to an aging population like in Europe & Japan (businessinsider).

The coming change will allow more births in the coming years and will give way to a higher ratio of female births. Hence China´s population could grow again in the coming decades which could reduce the average age of the population or at least slow down its rise.

This will be a boost for China´s economy, especially for consumption, which will last for decades to come. More babies don`t mean just more diapers, baby food and toddler toys, they also mean more health care spending, more education, more houses, more demand for textiles, electronics and other goods - more demand for everything. And this for a very long time.

Faster growing population and consumer spending will strengthen the domestic  Chinese economy and will reduce the country´s dependence from exports and from the global market. This will stimulate China´s transformation from an emerging country into a large modern economy like the US.

China´s kindled consumer spending also should fane imports  boosting the global economy for many years to come.

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