Mark Tanner
Mark Tanner
10 April 2019 0 Comments

In October 2015, China announced plans that it would be abolishing its one-child policy the following year, in hope of rebalancing its top-heavy population which is expected to see 500 million folk aged over 60 by 2050. The announcement, coupled with the earlier one-child policy changes, had brands selling everything from infant formula to educational toys readjusting their sales forecasts north. Even Disney invested an additional $800 million in the construction of the Shanghai Disney Resort to add extra capacity to account for the fertility spike.

On the surface things started off well, with birth rates jumping 7.9% between 2015 and 2016. But it was always likely to be just a blip. 2016 was the Year of the Monkey, which was a much more desirable zodiac for childbearing than 2015, which happened to be a Sheep Year. Superstitious Chinese don’t want their kids to be the docile followers associated with our woolly friends.

There was also some pent up demand from parents who had always longed for more than one child. Yet for most Chinese couples, the 37-year-old One Child Policy had reengineered the national psyche making it socially acceptable to have a single child. The competitiveness of China’s education system also sees parents invest significant sums into their child’s education and development, coupled with the premium paid for safe food and beverage and other extras to ensure their child gets the best start at life. Most couples consider it too expensive to have more than one child.

Since 2016, birth rates have fallen off a cliff, dropping by 12% in 2018. In another troublesome sign for China’s fertility planners, marriage rates hit record lows in 2018. Couples need to be married in China to legally have a child. Beijing will be banking on the country’s investment in robotics and Artificial Intelligence to help make up for the falling working population.

So should those infant formula brands, Lego, Disney and other companies hoping to sell their wares to Chinese youngins be revising their revenue forecasts down? Not at all. As Chinese families’ affluence rises, a disproportionate share of the increase goes to their child. As they only have one, few cut corners. A child born today will have parents earning 130% more than those born a decade ago. There have been countless surveys with Chinese consumers over the years about how they would spend additional wealth, and a large percentage always cite they’d spend it on their child’s education and development. Even extra budget directed at travel will often be to take the kids away, with families one of the fastest growing outbound tourist segments.

To get a real taste of how important the market for children’s goods and services is, take a trip to the town of Zhili in Zhejiang Province this November. The town famous for its child garment factories has a population of 100,000, which swells to around 350,000 around peak times such as Singles’ Day. The population boost comes from families relocating there in the hope that their kid will become China’s next top child model. Kids can earn up to ¥10,000 ($1,500) a day, with the most popular models reportedly earning a million ($150K) a year. The modelling rates highlight just how lucrative the children’s fashion category is, but also its competitiveness.

Although birth rates are falling, there were still 15.23 million children born in China last year – and a greater portion with affluent parents than ever. Citi Research, in their short video about the infant formula category, summed the situation up well: “having the right route-to-market, especially in the online channel, matters more than the underlying market”. That could be said for virtually every category in China, where there remain enormous target markets still willing to spend, regardless of slowing population or economic growth. China Skinny can assist with your route to market. Go to Page 2 to see this week’s China news and highlights.

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