The birth rate has long been falling in the world’s more developed nations, as populations get better access to contraception and education and decide that a smaller family fits better with their lifestyle. In China, however, the situation is very different.
In China, having smaller families with only one child is not a preference, it is written into the country’s law. This practice goes back to 1970 when the Chinese government reacted to the terrible famine of 1962 by producing an extensive propaganda campaign.
The famine had been caused by China’s rapidly expanding population growing faster than its food supply and the campaign extolled the virtues of a single child family. The campaign was extremely successful and in the years between 1970 and 1976 population growth decreased by 50%.
One child becomes the law
The success of the policy led to the one child policy being codified in law in 1979, but Chinese families soon found ways to find loopholes in the legislation.
Few government policies have been completely successful in restricting citizens’ fertility and Chinese couples began to pay fines for additional children and give birth outside the country. The current Chinese birth rate is around 1.5 live births per woman, which is low by international standards but still higher than some developed countries in the region, such as Japan, South Korea and Taiwan, where no fertility laws exist.
The system is reformed
The one-child system could, however, be set for change. The rules were relaxed as part of a broader package of reforms in November 2013 and economists worldwide are trying to assess how that change will affect the Chinese economy. The policy has resulted in a shrinking Chinese workforce, with some estimates suggesting that the country will see a reduction in workers of around 67 million by 2030. Clearly, this could have a dramatic effect on the ability of China to maintain its current increase in production levels.
What happens now?
Many observers believe that, despite the relaxation of the one-child rule, China will not see sufficient rises in population to compensate for the decrease in the working-age labour pool.
One reason for this is that Chinese culture has changed since the 1970s to accommodate the one-child law. The concept of family has altered in China and couples are now adapting their views to move towards a more Western idea of smaller families being the ideal.
The importance of international intelligence
At Prestige Wealth Solutions in Dubai, we are all too aware of the growing international nature of investment. This makes it more important than ever before to have genuine intelligence on the economy and political situation in place in any country our clients are investing in.
It is also vital to see this intelligence in a long-term context as investment may take many years to mature. In the case of China, most observers agree that there is little danger of a population explosion and that the government may in fact need to do more to increase available labour.
If you are concerned about your portfolio and how this – and any other international factor – might affect your investments, please get in touch with me, Alex Herbert, Regional Managing Partner of Prestige Wealth Solutions Dubai, today.