Japanese fertility and aging problms

The Demand and Supply Sides of China’s One-Child Policy

by Elaine Schwartz    •    Nov 17, 2013    •    588 Views

On Friday, Mead Johnson, maker of infant formulas, had its stock price pop. The reason? China’s Communist Party leadership said they would ease their one child per family policy.

You can see the impact on Mead Johnson’s stock price:

Mead John Stock Pops on New From China

From: Yahoo

 

Started more than 3 decades ago, one-child has had a monumental impact on Chinese demographics. In 1966, their average family had 6 children. Now the number is somewhere between 1.45 and 1.6 with 2.1 the replacement rate.

Looking at population growth, the result was what they had planned:

China's One Child Policy Results

From: BBC

 

All else, though, did not work out as they might have wanted.

One child per family has meant a population bulge at the older end of their population pyramid. As a result, there are relatively fewer individuals in the working population to support those who are no longer employed. Or as Philip O’Keefe, human development sector coordinator at the World Bank in Beijing said, “For the first time we are seeing a country getting old before it has gotten rich.”

Impact of China's One Child Policy: Population Pyramid

From: WSJ

 

In the manufacturing sector, the impact of one-child might also be the source of new dilemmas. The problem is that some producers are leaving China for lower wage countries. The reason for China’s higher wages could be a more slowly growing labor force.

Meanwhile, with boys the preferred single child, having 35 million extra men has created its own challenges. Economists have observed that savings and housing values have risen because men have had to make themselves more desirable. A more affluent man with a home might have more of a chance of snagging a wife.

We can add to all this worries about entrepreneurship. Some say boys who are only children become “little emperors” who sidestep competition and risk. Also, younger people tend to be the most enterprising. Diminish that segment of your population and you might be constraining your economic growth.

So you can see that China’s one-child policy has been a story about demand and supply. Whether looking at more demand for Mead Johnson infant formula and for single marriageable women or less of a supply of factory workers and entrepreneurs, everywhere we have markets that were skewed by a long lasting, soon to be lifted government regulation.

Sources and resources: At Yahoo Finance you can manipulate the time frame of the Mead Johnson graph while you can add other dates here to the WSJ Chinese population pyramids. For one-child stories ranging from WSJ’s Numbers Man talking about Chinese fertility rates to Bloomberg columnists presenting one-child policy details, to qz.com’s analysis, you can use WSJBloomberg and Quartz as perfect sources of information. Also, this series of reports is a superb summary of China’s one-child policy.

 

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