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China's Baby-Boom Bets Go Bust

Tyler Durden's picture




 

A year ago, when chatter began about China lifting its one-child policy, we explained the implications (and warned of excess exuberance). As Bloomberg reports, it appears China's anticipated baby boom is more of a bust. Nine months after stock-market wagers on a baby boom in China reached record levels, the bets have turned into some of the nation’s biggest losers as living costs deter couples from having more than one child - less than 3% of the 11 million Chinese couples eligible for another child applied for permission by the end of May, jeopardizing government efforts to bolster a population that the United Nations predicts will start shrinking by 2030.

 

As Bloomberg reports, relaxation of the one-child policy in the world’s most-populous nation is part of the government’s broadest expansion of economic freedoms since at least the 1990s.

At stake is China’s ability to avoid a demographic crisis as its population ages.

 

China’s fertility rate of 1.66 per woman compares with the 2.1 level needed to sustain population levels, according to the UN.

But the people didn't procreate...

Less than 3 percent of the 11 million Chinese couples eligible for another child applied for permission by the end of May, jeopardizing government efforts to bolster a population that the United Nations predicts will start shrinking by 2030.

Costs prohibitive - no matter how 'open' policy is...“The cost is a top consideration,” Sun, 32, said by phone. “My four-year-old daughter is heading to school and that will mean extra classes and higher spending. A nanny is too expensive so the grandparents look after her. They are approaching 70 and I don’t think they can handle a second child.”

A couple would need to spend 2.76 million yuan to support a child from birth to college in Beijing, according to China’s official Xinhua News Agency. The July 2013 report cited an informal survey and calculations suggesting that a husband and wife earning the average per-capita income would theoretically need to work for 23 years without eating and drinking to afford it.

 

Raising a child from birth through to 18 years of age costs about 23,000 yuan ($3,745) a year, according to Credit Suisse Group AG, equivalent to 43 percent of the average household income in China.

 

Average household income in China is about 53,118 yuan, according to the China Household Finance Survey compiled by the Southwestern University of Finance and Economics in Chengdu.

 

The confidence of couples in their ability to provide for a second child may also be waning as China’s economic growth slows, Asian Capital’s Wan said. Gross domestic product will probably expand 7.4 percent this year, the weakest pace since 1990, according to economist estimates compiled by Bloomberg.

 

“People tend to give birth to a second child when the macro-environment and property prices are more favorable and they have job security,” Wan said by phone on Aug. 8.

The unsurprisng conclusion...

“There was too much speculation about a baby boom,” Zhang Gang, a strategist at Central China Securities Co. in Shanghai, said by phone on Aug. 8. “Baby-related stocks still have room to fall further.”

*  *  *

Wait what? Speculators over-estimated the impact of a government policy? Whocouldanode?

“With a rapidly aging population and declining birth rate, even relaxing the birth-control act now won’t help reverse the trend anytime soon,” Hao Hong, a Hong Kong-based strategist at Bocom, said on Aug. 15. “China will be dealing with wage pressure soon.”

 

As Bloomberg reports, relaxation of the one-child policy in the world’s most-populous nation is part of the government’s broadest expansion of economic freedoms since at least the 1990s.

At stake is China’s ability to avoid a demographic crisis as its population ages.

 

China’s fertility rate of 1.66 per woman compares with the 2.1 level needed to sustain population levels, according to the UN.

But the people didn't procreate...

Less than 3 percent of the 11 million Chinese couples eligible for another child applied for permission by the end of May, jeopardizing government efforts to bolster a population that the United Nations predicts will start shrinking by 2030.

Costs prohibitive - no matter how 'open' policy is...“The cost is a top consideration,” Sun, 32, said by phone. “My four-year-old daughter is heading to school and that will mean extra classes and higher spending. A nanny is too expensive so the grandparents look after her. They are approaching 70 and I don’t think they can handle a second child.”

A couple would need to spend 2.76 million yuan to support a child from birth to college in Beijing, according to China’s official Xinhua News Agency. The July 2013 report cited an informal survey and calculations suggesting that a husband and wife earning the average per-capita income would theoretically need to work for 23 years without eating and drinking to afford it.

 

Raising a child from birth through to 18 years of age costs about 23,000 yuan ($3,745) a year, according to Credit Suisse Group AG, equivalent to 43 percent of the average household income in China.

 

Average household income in China is about 53,118 yuan, according to the China Household Finance Survey compiled by the Southwestern University of Finance and Economics in Chengdu.

 

The confidence of couples in their ability to provide for a second child may also be waning as China’s economic growth slows, Asian Capital’s Wan said. Gross domestic product will probably expand 7.4 percent this year, the weakest pace since 1990, according to economist estimates compiled by Bloomberg.

 

“People tend to give birth to a second child when the macro-environment and property prices are more favorable and they have job security,” Wan said by phone on Aug. 8.

The unsurprisng conclusion...

“There was too much speculation about a baby boom,” Zhang Gang, a strategist at Central China Securities Co. in Shanghai, said by phone on Aug. 8. “Baby-related stocks still have room to fall further.”

*  *  *

Wait what? Speculators over-estimated the impact of a government policy? Whocouldanode?

“With a rapidly aging population and declining birth rate, even relaxing the birth-control act now won’t help reverse the trend anytime soon,” Hao Hong, a Hong Kong-based strategist at Bocom, said on Aug. 15. “China will be dealing with wage pressure soon.”

 

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Sat, 08/23/2014 - 16:45 | 5135052 duo
duo's picture

They just need to take a lesson from LBJ.  If the government pays people to have kids, you will get more of them.  They may all be poor, but at least there will be moar.

Sat, 08/23/2014 - 16:55 | 5135075 knukles
knukles's picture

I'm just the messenger, folks....  this is via the Canada Free Press:

“I’ll have those niggers voting Democratic for the next 200 years.” —Lyndon B. Johnson to two governors on Air Force One -

“These Negroes, they’re getting pretty uppity these days and that’s a problem for us since they’ve got something now they never had before, the political pull to back up their uppityness. Now we’ve got to do something about this, we’ve got to give them a little something, just enough to quiet them down, not enough to make a difference.”—LBJ

            You can find this in Ronald Kessler’s “Inside The White House”

www.canadafreepress.com/index.php/article/40889

Sat, 08/23/2014 - 17:02 | 5135089 Cognitive Dissonance
Cognitive Dissonance's picture

"Now we’ve got to do something about this, we’ve got to give them a little something, just enough to quiet them down, not enough to make a difference.”

 

This technique is now being applied to the American middle class.

Sun, 08/24/2014 - 11:34 | 5137015 Davalicious
Davalicious's picture

The one child policy never obtained. A Chinese guy explained it to me. He said that people farmed out their second, and subsequent, children to childless relatives. They just distributed the brood. So why should we expect a boom now?

Sat, 08/23/2014 - 17:15 | 5135130 Notsobadwlad
Notsobadwlad's picture

A country-corporation's wealth is measure by the number of its assets.

... another reason for open border immigration.

One cannot maintain an unsustainable Ponzi growth paradigm without more people.

A population issue is a financial issue.

Sun, 08/24/2014 - 00:59 | 5136253 bitterwolf
bitterwolf's picture

you got that right...TPTP want NAU and Obumster gonna leagize millions of screaming brown folk to pump that SS ponzi right back up

Sat, 08/23/2014 - 19:54 | 5135490 NoWayJose
NoWayJose's picture

Same thing with unemployed people. Give 'em cash to not work and soon you get more unemployed than employed. Same incentives with corporations relocating their corporate HQ out of the US.

Sat, 08/23/2014 - 16:54 | 5135071 knukles
knukles's picture

.

Sat, 08/23/2014 - 17:22 | 5135141 ShrNfr
ShrNfr's picture

,

Sat, 08/23/2014 - 17:41 | 5135161 knukles
knukles's picture

OK, then kinda O/T but not too far as everybody is in need of Ebola porn to go with the main course of war and side order of earthly delights of disasters, in today's vein, volcano style....
Check out Flightaware and Flightradar specifically the Western Coast of Africa.
Not shit for aircraft.

Hah!

So the deafening silence (crickets) of an unannounced Cordon Sanitaire (remember folks, nothing to worry about and we wouldn't want to have to change our tunes, now, would we) looks to have been imposed.

Booyah!  And no news about it.

Further, anybody else but me "curious" as to just fucking how that "experimental" vaccine ZMAPP managed to cure this oddly new and utterly heretofore unknown strain of Ebola, just in the nick of time?  Big bidnez and MIC turning the whole of the West Coast into a vaccine factory?   N'how come the stuff's always come out of the wild and been able to be contained to a few rural villages and this time, ba boom, right in the bigger cities?   And which country was it told the US Army to stop the "experiments"? 

No problems, eh?
So why no flights?
Hmmmm?

Nada and crickets for breakfast lunch and dinner.

Sat, 08/23/2014 - 16:56 | 5135081 Bumbu Sauce
Bumbu Sauce's picture

Who has time to raise a kid when you are assembling phone parts in a Foxconn suicide factory 20+ hours a day.

Someone needs to start a consulting business in China advocating for Life-Work balance.  You'll make millions or be killed.  

Sat, 08/23/2014 - 17:06 | 5135103 Skateboarder
Skateboarder's picture

I can see it now: "Making the most out of your 2-minute bathroom break. Do some jumping jacks. Boom, exercise. Bathrooms, now featuring elevator music. Entertainment, check. Free water. Refreshment, check."

Sat, 08/23/2014 - 17:02 | 5135096 kchrisc
kchrisc's picture

Being a criminal syndicate of theft and violence, government always accomplishes the opposite of the stated goal. Always.

An American, not US subject.

Sat, 08/23/2014 - 17:04 | 5135099 dognamedabu
dognamedabu's picture

Well, there is always India.

Sat, 08/23/2014 - 17:09 | 5135104 Notsobadwlad
Notsobadwlad's picture

Currently visiting China on business ... one sees a lot of young people, but very few children. The guy I am traveling with has two kids.

Maybe the upwardly mobile biological clocks will start ticking louder in a few years... but I am not sure. Kids are not a big part of the culture that I see.

... and there are still 30 million men of marrying age that will never find a Chinese wife ... would make a pretty good army, if one was so inclined.

Sat, 08/23/2014 - 17:23 | 5135129 Cognitive Dissonance
Cognitive Dissonance's picture

I am certain I am over generalizing here but........with many either born directly into China's growing consumer culture or relocated from farming villages many years or decades ago, the traditional 'need' to have children, such as to help in the fields and to take care of the parents when they age, has greatly diminished.

This changing demographic is occurring in Japan as well as the USA, though to a lessor extent and not for the exact same reasons.

Sat, 08/23/2014 - 17:16 | 5135136 franciscopendergrass
franciscopendergrass's picture

"less than 3% of the 11 million Chinese couples eligible for another child applied for permission by the end of May"

I'd wish people on welfare would need permission from the state to procreate.

Sat, 08/23/2014 - 18:54 | 5135343 holmes
holmes's picture

I wish people on welfare were sterilized.

Sun, 08/24/2014 - 02:09 | 5136365 Notsobadwlad
Notsobadwlad's picture

They get free abortions instead... just saying. It has much of the same effect.

Sat, 08/23/2014 - 17:28 | 5135153 GooseShtepping Moron
GooseShtepping Moron's picture

I would like to point out how sick it is that couples actually need to apply for permission to have a child. The modern megastate, no matter whether it is organized under communist or democratic lines, is a hideous monster that must be decapitated.

Sat, 08/23/2014 - 17:37 | 5135166 Cognitive Dissonance
Cognitive Dissonance's picture

"It would be chaos if you let people procreate willy nilly whenever they felt like it." - Dear Leader Obama

Sat, 08/23/2014 - 22:13 | 5135815 Wild Theories
Wild Theories's picture

Normally I'd agree with that sentiment against government control, but population control is a necessary evil.

In a finite world of finite resources, and especially in overpopulated and resource scarce(comparative to population) Asia, you cannot just go on making infinte number of babies without consequences.

 

As much as western MSM like to play up the 'population crisis' of Japan and China, the real population crisis nation on the planet is actually going to be India - for those of you who still have enough miles left in your lifespan, we can all watch where India goes over the next 50 yrs as they keep on breeding like rabbits.

Sun, 08/24/2014 - 02:18 | 5136371 Notsobadwlad
Notsobadwlad's picture

Historically there have been convenient plagues, wars and disasters that kept population in line. And yet, even in classical Greece the elitists supposedly complained about "overpopulation".

Although, if one looks at the historical population charts, it sure looks as if something went wrong in the mid to late 16th century, when population just sort of started taking off.

Some say it was technology that made it happen ... personally I believe that both the technology revolution and population explosion are coincident, but not necessarily co-dependent events.

... maybe having something to do with those wood-carvings showing events in (over) Basel and Nuremberg.

Sat, 08/23/2014 - 17:34 | 5135162 Anarchy 99
Anarchy 99's picture

Naaaa......more people, more gas:

Environment Minister Hendricks wants to ban cows from farting– guess you will be next. Bean farmers – you better start looking for an alternative crop. Hendricks says cows emit tons of methane gas and are nearly as detrimental to the environment such as car exhaust. Look out – there are more people than cows. Guess there will soon be a tax on farting. Then it will be a small step for mankind to extend it to sex and then breathing. Of course all in the name of global warming.

Sat, 08/23/2014 - 17:40 | 5135172 Cognitive Dissonance
Cognitive Dissonance's picture

Mrs Cog states if you soak the beans over night it greatly reduces their natural gas potential. I can attest to this, having 79% less odorific emanations after eating her soaked beans.  :-)

Sat, 08/23/2014 - 17:41 | 5135176 knukles
knukles's picture

But, just think of it this way.   It's all fo da chillen'

Sat, 08/23/2014 - 17:45 | 5135188 Anarchy 99
Anarchy 99's picture

LOL..........and now you can take the nose clips off.

Sat, 08/23/2014 - 17:47 | 5135193 Cognitive Dissonance
Cognitive Dissonance's picture

Wait....how did you know.....never mind.

Sun, 08/24/2014 - 09:13 | 5136682 IndianaJohn
IndianaJohn's picture

A 24 hour soak @ room temperature will yeild a 90% reduction of emitted gases.

Sat, 08/23/2014 - 17:38 | 5135168 kito
kito's picture

The Chinese have no interest in boosting population. They have very clearly stated that optimal population is 800 million. Part of the reason they continue to urbanize is to keep the population down as urban families reproduce at a much lower rate than rural families.

Sat, 08/23/2014 - 17:43 | 5135177 knukles
knukles's picture

Funny that same shit don't fit with our inner cities....

Sat, 08/23/2014 - 18:22 | 5135267 Joebloinvestor
Joebloinvestor's picture

Get rid of the free stuff and it will.

Sat, 08/23/2014 - 17:44 | 5135183 craus
craus's picture

China has a high rate of males to females.

We should get our 'queens' to be a male bride in China.

Seems it would take care of a few problems win-win.

Sat, 08/23/2014 - 17:47 | 5135192 U4 eee aaa
U4 eee aaa's picture

The workers of the world are getting their revenge on the exploitative business owners. They are keeping it zipped and cutting off access to the most vital component of any business, workers and customers

VIVA LA REVOLUTION!

Sat, 08/23/2014 - 17:51 | 5135196 Smegley Wanxalot
Smegley Wanxalot's picture

FAWCK!  What are we gonna do as a society if we don't have enough future slave labor onto which to dump our problems? 

Whaddawee gotta solve all this shit we created ourselves, now???  FAWKKKKK!

Sat, 08/23/2014 - 18:55 | 5135346 holmes
holmes's picture

One word: ROBOTS

Sat, 08/23/2014 - 18:27 | 5135277 himaroid
himaroid's picture

If those Chinese chicks really look like the ZH ads, I would volunteer to help out.

Sat, 08/23/2014 - 18:49 | 5135332 reader2010
reader2010's picture

The historical records of China show us that China's population was never over 25 million before corn, red/white potatoes,  and sugar cane introduced in China in the 16th century. 

Sat, 08/23/2014 - 21:49 | 5135766 Solarman
Solarman's picture

If true, that is amazing.

Sat, 08/23/2014 - 20:59 | 5135648 BobRocket
BobRocket's picture

Ha !, those fuckwits in China know nothing about controlling the fertility rate.

 

The only way to raise fertility above 2.1 from 1.6 is to start killing children under 5.

 

Increasing child mortality creates a baby boom.

 

You can do the same thing, massively increasing 'apparent child mortality' by having a war where all the young people are sent off to be slaughtered on a foreign field whilst their parents are still young enough to replace them (the parents will overcompensate by having more than replacement numbers)

 

The developed world will be first off the demographic cliff, all those baby boomers who swelled the population (raising house prices and taxes for pensions) by not dying are rapidly becoming the geriatric boomers, they own everything yet don't consume much and they will start to die off in increasing numbers over the next 30 years.

 

The third world (all those really shittty places where 1 in 5 under 5's this year will die) is rapidly catching up, their populations are exploding as child mortality falls, their populations will age and die like ours.

 

Any one person will always be financially better off with fewer children as long as they believe that they will have sufficient resources to take care of them in their dying years.

 

The die off will happen slowly at first, almost imperceptably, it will gain speed like an unbraked rollercoaster on a gradual decline, we will briefly enjoy the extra space and resources we seem to find ourselves with and then, all of a sudden, it will be too late, the species will be too thinly spread to continue and that will be that.

 

The selfish gene (the one that made us apex predator) will have the last laugh as we shuffle off this mortal coil.

 

 

Sat, 08/23/2014 - 21:41 | 5135753 l8apex
l8apex's picture

I think the outcomes in the movie Idiotacracy are much more likely, particularly as it's already happening.

Sun, 08/24/2014 - 00:23 | 5136189 cape_royds
cape_royds's picture

China is just one more country that will have to go through demographic transition.

Once the last really big cohorts have gone through their lives, things should get a lot easier. They just have to slog through a tough 20-30 period of relative stagnation.

The entire developed world is in the same situation, at different points along the line.

Japan is already in the midst of it--in a way you could almost consider them to be ahead since they're halfway through the worst of it already.

Sun, 08/24/2014 - 02:56 | 5136415 Hannibal Barca
Hannibal Barca's picture

Takes time. The boom will happen.

Sun, 08/24/2014 - 14:16 | 5137379 strangewalk
strangewalk's picture

Wealth envy has take over China, they worship money and anything that costs as much as a kid will be avoided. Most Chinese women of child bearing age have had several abortions already, they're numb to it. 

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