Doug Anderson, SVP, Research & Development
SUMMARY: Marketers entering China will need to evaluate their portfolios very carefully. A mix of brands, targeted to different demographic groups, or those that work well in India or other less-developed nations may struggle in China. The one child policy—as well as other core changes in Chinese society—has radically altered the population demographic profile of China from what is expected in a country with a similar level of development.
Greater China today accounts for nearly one in five persons living on the face of Earth—that’s almost 1.4 billion people. Shanghai alone has more than 17 million people—that’s more than live in the U.S. cities of New York, Los Angeles, and Chicago combined. As a marketplace, the potential of China is unmatched. However, marketers who enter China must not make assumptions about the demographic makeup of the Chinese population based on what they see in other countries, for China is substantially different from other nations with similar levels of economic development.
Slow Population Growth
Global fertility rates (excluding China) have fallen by around 50%, but the fertility rate in China has dropped by over 70% (from 1950 to 2010). According to the Chinese government, the one child policy, instituted in 1979, reduced births between 1979 and 2000 by over 250 million. China has gone from a country with a population in line with the average for the less-developed world to one more aligned with the more-developed world. Current fertility rates in China are a bit below 1.8, while those in the more-developed world average just over 1.6.
Population growth in China has been arrested, from year-over-year percent increases of 3% in the 1960s, to falling below 1% per year by 1997 and estimated to fall below 0.5% per year by 2017. The United Nations estimates that China will stop growing entirely by around 2032, and will then begin to shrink. The more-developed countries in the world have been growing very slowly for some time, but China’s growth rate will fall below the average for the more-developed world in less than 20 years. By around 2028, India will surpass China in population and become the world’s largest country.
But make no mistake: China is still very, very large, and even a 1% growth rate is the same as adding another city the size of Beijing to the country in a year. However, the combination of an increasingly urban society, economic development, industrialization, and the one child policy has substantially lowered the amount China population will grow.
One of the less obvious impacts of the one child policy has been to greatly accelerate the aging of the Chinese population. Less-developed countries are typically much younger than more developed ones. For example, the median age of all of Africa is less than 20 today, while the median of Western Europe is more than twice that.
At its youngest—around 1970—nearly 51% of the population of China was under 20 years of age. For comparison, even during the heights of the Baby Boom, the share under 20 in the United States never reached 40%. Two years from now, the share of the Chinese population under the age of 20 will fall below the same share in the U.S., and will continue to fall for the near future. Today, the median age for the U.S. is 36.6 and China is 34.2.
As the share of children falls, the share of older persons will rise. For China, population aging will hit much more quickly than even in parts of the more-developed world. The chart below compares the median age of the Chinese and U.S. populations. In around 15 years, the median age in China will be older than in the U.S.
Male / Female Ratio
Another impact of the one child policy is an ever increasing gender ratio favoring males. By 2020, there will be more than 24 million Chinese men who may not find a Chinese wife. Currently 119 boys are born for every 100 girls, though the ratio in some areas is much higher—around 130 to 100.
Implications for Marketers
Marketers entering China will need to evaluate their portfolios very carefully. A mix of brands, targeted to different demographic groups, or those that work well in India or other less-developed nations may struggle in China. Large families with children—typically the biggest market segment available in the less-developed world—are nonexistent in China. Very few households have more than two children and those with one greatly outnumber those with two. As the population ages and the gender ratio becomes more imbalanced, household sizes will continue to shrink and the share of households that have children will continue to fall. This means less variance in the buying rate for products that rely on use by multiple family members for volume. Gaining new users and the retention of current users will be far more important strategies than seeking to grow volume within existing users.
Lessons marketers learn in the more-developed world about targeting older consumers should pay dividends in China. By around 2038, there will be as many persons over the age of 65 in China as there are young persons under the age of 20. After 2038, older consumers will outnumber younger ones. Marketers who can tap these older generations could do very well.
The State Population and Family Planning Commission has recently said the one child policy will remain in force until 2015, but in prior announcements has suggested it could be at least five years longer. Regardless of when the policy might be altered, it will take decades of large increases in fertility and decades after that for the aging of China's population to be reversed. This—as well as other core changes in Chinese society—has radically altered the population demographic profile of China from what is expected in a country with a similar level of development. China has reined in its population growth and that has contributed substantially to its economic growth over the past several decades. However, China is still a poor country, with average incomes around 14% of those in the U.S., and incomes vary greatly within the vastness that is China.
In some ways, particularly in the more westernized cities like Shanghai, the similarities between China and the U.S. seem stronger than ever. But despite some key demographic similarities to the more developed world, China is a very different place, with a unique culture and attitudes, and one marketers must carefully negotiate.
United Nations Population Division World Population Prospects: The 2008 Revision
The Washington Post Looming population crisis forces China to revisit one-child policy (December 12, 2009)