Chinese officials announced in 2016 that couples could bear two children each, a way to counter an aging population and potential shortage of younger workers. That edict ended more than 45 years of a one-child policy aimed at population control. But fertility rates had already been falling for some two decades already as personal wealth grew. China’s two-child policy is struggling now to raise birth rates.
Retailers out there might need to retool their China sales strategies now. Sustained low birth rates in China, the world’s biggest country, mean more spending on cars, phones, travel and personal health. Alcohol, cigarettes and fast food will begin to lose popularity among consumers, market researchers say.
Surprising lows
China’s National Bureau of Statistics says 17.23 million babies were born in 2017, translating to a fertility rate of 1.24%, according to state-run news website China Daily. The figure is lower than Japan's 1.46%. This China Dailycolumn hints at “negative population growth in the near future.”
The one-child policy, established in 1980, was aimed at keeping the overall population, now around 1.38 billion, from getting too big. Last year, the first year since it was abolished, was therefore “expected to witness a marked rise in birth rate,” China’s Southern Metropolitan Daily says via China Daily. But it came in lower than the 1.29% of 2016. It was already 1.34% in 2001.
Shifting strategy
China's consumers are now spending more on “upgrading their lifestyles,” a Credit Suisse Research Institute report indicated in October 2017. That means more money goes to healthcare, travel and entertainment compared to other emerging markets. Cars, property and mobile phones are getting a boost from this trend too, the report says. Those devices are useful, fun and good for status seekers. They cost money that might otherwise be split by childcare.
Sales of automobiles were 12% of China’s total in 2016 and sales of communication appliances including smartphones rose 3%, up from 5% and 1.5% in 2001, says Chang Liu, an economist with Capital Economics in London.
Smart-home gear and other items sold via e-commerce–particularly on signature events such as Singles’ Day every November 11–should generate growing consumer enthusiasm in China, says Michael Stanat, director of global operations with SIS International Research in New York.
It's not just about stuff. Moneyed people see “experiences” now as a priority, McKinsey & Co. says in this report. That means, for one thing, “the popularity of international travel is astounding among Chinese consumers,” the report says. The same goes for foreign wines and chocolates.
Aging population and, maybe, newborns
The percentage of China’s population aged 65 or older should soon approximate percentages in the United Kingdom and the United States, catalyzing demand for healthcare services, the Credit Suisse Research Institute says.
Don't forget to add more airplane seats for the grandparents next time the family travels overseas.
“The main driver of future consumption patterns is going to be the aging of the population, given that China's population is aging more rapidly than any human population has ever aged,” says Steven Mosher, president of the Population Research Institute in the United States.
If the two-child policy ever takes off, watch for growth in baby care goods – with a wary eye on sales of milk for children following a scandal in 2008 that turned up tainted products.
“The country’s aging population and the abolition of the one-child policy may, at the margin, lead to more sales of products for the young and the elderly, such as baby strollers or walkers,” Liu says.
Decreasing demand
Not every item out there will catch the eye of the moneyed small family.
Chinese consumers are spending less on housing and food, the Credit Suisse institute report says. Those would be high-budget items for growing families with children.
Sales of fast food might especially falter as tastes go upmarket and healthy living becomes primo. That trend is expected to hit the American fast food giants as well China’s homegrown competitors. Fast food growth slowed in 2016 and the same was expected last year.
Sales in a category covering food, beverages, liquor and tobacco has fallen by the most from 2001 to 2016 as a share of total sales, Liu says. This category made up more than 20% of sales in 2001 and about 12% in 2016, the economist says.
Source: Forbes
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