One child, two children - what will it mean for China (and cows)

China's decision to relax its one child policy will inevitably have an impact on China's population and GDP growth. According to ANZ analysis, China will become the largest economy and the second largest consumer market in 2020.

The announcement China will abandon the last remnants of its one-child-per-family policy is a landmark move for Asia's giant.

"China's population growth could increase 0.18 per cent a year, which will give add an extra 0.18 per cent to GDP growth."
Li-Gang Liu, Chief Economist, Greater China

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Assuming China's birth rate will grow from 1.2 per cent to 2.1 per cent (a rate that is typically associated with two-child birth on average)in the next five years, China's population growth could increase 0.18 per cent a year, which will add an extra 0.18 per cent to GDP growth.

If all such extra GDP growth is devoted to milk products alone to feed the new babies, the impact to that sector would be around $US19 billion to $US20 billion a year.

The policy will be felt differently across urban and rural sectors. It will have a bigger impact in rural areas than urban ones as most rural families could not qualify for the previous relaxation of the one-Child policy two years ago because many rural couples are from two-children families.

Meanwhile, urban households will continue to take a look-and-see attitude towards the policy change as China's urban housing and education remain expensive.

Meanwhile, the medium-to-high growth set by the fifth plenum could refer to 6.5 per cent growth. We believe with further structural reforms, this growth target is highly obtainable.

Following the policy announcement, BlueNotes surveyed 10 Chinese nationals on WeChat, one of China’s most popular social media networks, on their reactions to the change. Below is a sample of their responses.

Has this changed plans for your family? YES – 0 per cent NO – 100 per cent

Respondents said there were many important aspects to consider regardless of the policy. Some pointed out families wanting to expand before the change were able to deliver children offshore before returning to China anyway.

“If I decided to have another kid, even without the policy change I would have tried to figure out a way to have another one,” one respondent said.

Do you feel positive about the change?  YES – 80 per cent NO – 20 per cent

Respondents in support of the change said it might reduce the pressure on China’s aging population, while those against warned it would place more strain on China’s already thin public education and medical resources.

What had the one-child policy changed the most about China?

Respondents noted both cultural and demographic changes from the policy, ranging from a rapidly ageing population to an inability of children with no siblings to understand sharing.

Li-Gang Liu is Chief Economist, Greater China at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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