Friday, October 30, 2015

Economy: China - Waiting For The Baby Boom

(Drivebycuriosity) - Finally. Yesterday China´s government announced the end of the one-child policy which was implemented in 1979. Back then China was a poor and had a slow growing economy. Feeding a fast expanding population was a challenge. It would have lead to a stagnating or shrinking income per capita as you can see in some African countries. But since then the republic experienced decades of phenomenal growth. Today China´s economy is catching up swiftly to the US with a growth rate of about 7% annually and has already a huge affluent middle class. Salaries have been rising very fast so the Chinese incomes are supporting larger families.

The one-child law did not just reduce personal freedom, it also reduced the proportion of female births drastically thanks to the unfortunate Chinese obsession with male heirs. The low number of female infants had been depressing China´s population growth drastically leading to an aging population like in Europe & Japan (businessinsider). The change to a law which permits two children per family could restart population growth in China (today 1,355 billion wikipedia). It also could reduce the average age of the population or at least slow down its rise.

I think the end of the one-child law could ignite a baby boom in the coming years. Couples, who want to have two children, but were hold back by law, could do that in the coming years, if they are still in a proper age. There could be a backlog.

A stronger population growth should be a boost for China´s economy, especially for consumption, which will last for decades to come. More babies don`t just mean  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 also will stimulate China´s transformation from an emerging country into a large modern economy like the US.
China´s boosted consumer spending also should fane imports fostering so the global economy for many years to come.

P.S.: For illustration I used a painting by the Chinese artist  Zhang Xiaogang. Maybe a couple who wants to expand?

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