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China’s recent announcement that it is relaxing its one-child policy will certainly have an impact on the entire nation. In the 35 years since the implementation of the policy, immense shifts in population behaviours and industry expectations have occurred, all of which are now firmly entrenched in the country’s collective psyche. Each aspect of the consequence of the one-child policy will need to be addressed as the two-child policy comes into effect.

Parenting Investments Will Need to Evolve:

For 35 years, Chinese parents have focused on providing the best possible outcomes for their only child. Although ensuring a happy future for the child is part of the plan, for many Chinese families, especially those in rural communities, a well-educated child is more likely to have a better paying job and be better able to support both parents as they age. With few geriatric-based social services available from the government, a financially secure child is the best hope for these parents to have a secure old age. Consequently, both mother and father will work long, often back-breaking shifts and forgo vacations, creature comforts or any other “luxury,” if it allows them to pay for better schools and services for their only baby. For those who are young enough to have a second child, the extra work required to cover the additional educational expenses is often prohibitive.

A Culture of Saving Versus Investing:

While on the one hand, saving money is deemed an admirable trait, in China, the widely revered practice has had negative consequences for the country’s economy. Because of the gender imbalance caused by the One-Child policy (by 2020, there will be approximately 30 million more marriageable men than women), each man must strive to attract – and keep – the attention of a potential wife. Owning a home is one factor that sits high on the woman’s list of potential mate attributes. Men without homes are more likely also to be men without wives, so today’s young male professional is highly motivated to save, not spend, his income.

Savings might also be used to support family elders as they age, another unavoidable aspect of young Chinese manhood. However, liquid cash that’s put away to purchase a house or to cover future care-giving costs ultimately reduces immediate investment in the local economy, a fact that has remained off the radar of economic policy development.

New Revenue Sources:

Perhaps not surprisingly, along with a reduced birthrate came new revenue streams. For the government, permitting fees and fines for childbearing are collected from every family with children. Especially in rural areas, enforcement of the one-child policy has created significant financial resources upon which the entire community relies. Permits must be issued before any pregnancy is allowed, and local governments are responsible for issuing those, registering the birth and carrying out “family inspections.” Rural families can purchase extra permits for a second or even a third child because of their reliance on subsistence farming to survive. For couples who can’t conceive, reproductive services are available at significant cost and capturing and freezing more than one fertilized egg may subject the couple to a fine, even if only one egg is eventually used.

There’s an enormous infrastructure now in place around the one-child policy that will need an overhaul as the two-child policy comes into play.

Two Child Policy May Also Trigger Economic Growth:

Even these economic obstacles offer glimmers of opportunity, however. A change in both state and local investment is possible, as both national and regional governments contemplate how to support the anticipated growth. The country’s high reverence for education may be reflected in increased school construction. The investments would increase the opportunity for a good education across the country while reducing the exorbitant cost today’s families are forced to bear. Hospitals, medical centers and other services related to childbearing and rearing are also options, since, once born, each additional child will require additional services. And local spending, – as opposed to saving – might put more cash into the local, regional and national financial systems, which will also have an impact on the overall national economy.

China continues to offer great economic opportunity, even in the face of these momentous evolution in its policy. To read about how the parenting laws affect Chinese factory workers, check out Part 2 of this article.

To discuss how your enterprise can successfully navigate through this challenging transition, contact me today.


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