Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence, the podcast
Speaker 1: that explores the big ideas and trends moving money across
Speaker 1: the region. I'm John Lee in Hong Kong, and I'm.
Speaker 2: Kai JIDM Dreva, also in Hong Kong.
Speaker 3: John.
Speaker 2: Last month, China released some really interesting numbers and it
Speaker 2: wasn't just GDP. They also released data on population. And
Speaker 2: we've known for some time population has been falling in China.
Speaker 2: While for the third year in a row, the nation's
Speaker 2: population declined.
Speaker 1: And remember that twenty twenty four was the Year of
Speaker 1: the Dragon, that's considered an auspicious year to have kids.
Speaker 2: Yeah, and it was. I mean, we had more babies
Speaker 2: born in China, but it still wasn't enough to sort
Speaker 2: of offset the population decline. And it's not necessarily a
Speaker 2: bad thing to have a smaller older population. You know,
Speaker 2: you have people living longer lives, and you also have
Speaker 2: scientists point to fewer resources being used to sustain a
Speaker 2: population or sustain a country.
Speaker 1: But unfortunately, financial markets take a falling population quite negatively. Well,
Speaker 1: today we have a guest who's written extensively on this topic.
Speaker 1: She is aiderly senior consumer analyst at Bloomberg Intelligence. Aida,
Speaker 1: Welcome to the show.
Speaker 3: Thank you very much.
Speaker 1: Ada. What did the latest data release tell us about
Speaker 1: Chinese population?
Speaker 3: Well, you know, for twenty twenty four, we have seen
Speaker 3: the population at about one point four eight billion people,
Speaker 3: so it was a decline from the previous year, even
Speaker 3: though the birth rate has increased. So what we are
Speaker 3: seeing is that people are getting older. The death rate
Speaker 3: is definitely climbing on a year on year basis, and
Speaker 3: the birth rate in terms of the boost is mainly
Speaker 3: due to the year of the Dragon as well as
Speaker 3: there's a pent up in babies because of COVID and
Speaker 3: so forth. But if you look at the marriage rate
Speaker 3: for twenty twenty four, it reached record low and hint's
Speaker 3: going forward, if less people are getting married, the birth
Speaker 3: rate is unlikely to pick up.
Speaker 2: Now, we have a lot of listeners in the States
Speaker 2: and Western countries, and it may be good to explain
Speaker 2: a bit about why the marriage component is really important
Speaker 2: for stats here because in places like Friends or the States,
Speaker 2: you know, you can have more than fifty percent of
Speaker 2: children I think come out of outside of marriage. But
Speaker 2: it's quite different in Asia.
Speaker 3: Right correct, especially in China where the society still view
Speaker 3: marriage as the base of the society. And also what
Speaker 3: happened is if your child is born out of a
Speaker 3: legitimate marriage, it becomes quite tricky with the hukou system
Speaker 3: where it is linked to social securities, healthcare, education, so
Speaker 3: everything becomes a lot more difficult for the child born
Speaker 3: out of marriage. So that's why it is very important
Speaker 3: to look at the marriage rate and then to project
Speaker 3: the birth rate.
Speaker 1: And ada, can you give us some numbers exactly how
Speaker 1: many babies were born in China last year and how
Speaker 1: does this compare versus the history.
Speaker 3: So last year we had about nine point five million
Speaker 3: babies were born, and when you look at historically, they
Speaker 3: were much higher. So twenty years ago, the twenty years
Speaker 3: high was nineteen point eight million babies per year. So
Speaker 3: this is literally half already and going forward, we are
Speaker 3: projecting that it could gradually dip to about seven point
Speaker 3: nine million babies by twenty thirty five. So the trajectory
Speaker 3: is definitely going down. And that's because of the high
Speaker 3: cost of having babies, and that's not only financially, but
Speaker 3: it's also on the resources in terms of the mother's
Speaker 3: time or the parents' time to raise the children. The
Speaker 3: education system has been very tough, a high youth unemployment rate,
Speaker 3: which means that if you have your child, now what
Speaker 3: are they going to do when they get older? Will
Speaker 3: they get a job? Will they be able to sustain themselves?
Speaker 3: So all these are actually on the potential parents' mind
Speaker 3: at the moment, and of course you know that will
Speaker 3: come with what will the government be able to stimulate
Speaker 3: them or learn them with bonuses or incentives. So the
Speaker 3: government has been coming out with very very creative ways
Speaker 3: of trying to stimulate people to have children. And I
Speaker 3: have a very interesting case study recently. There's a lower
Speaker 3: tier city called Tienmen. In twenty twenty four, Tienman's birth
Speaker 3: rate went up by seventeen percent.
Speaker 2: That's virtually unheard of exactly.
Speaker 3: Of course, you know twenty twenty four the birth rate
Speaker 3: went up, but seventeen percent is a massive search. And
Speaker 3: when you dig deeper, the local governments have been putting
Speaker 3: a lot of different subsidies, a lot of help to
Speaker 3: the parents in order to lure them to have more children.
Speaker 3: When you add up all the various subsidies, including some
Speaker 3: of them is one time home buying subsidies, it could
Speaker 3: be about thirty one thousand US dollar, so it is
Speaker 3: actually quite a big if you call it a baby
Speaker 3: cash bonus to stimulate birth.
Speaker 1: So can you dig deeper into some of these subsidies,
Speaker 1: like what are they and what are some of the
Speaker 1: more creative ones you've heard of?
Speaker 3: Well, for Tienman's when in particular, they have the subsidies
Speaker 3: for genetic screening, so for like DWNCE syndromes, birth maternity leads.
Speaker 3: These are you know, prolonging it giving also paternity leads,
Speaker 3: monthly childcare subsidies after the age of three years old,
Speaker 3: as well as other measure like the birth rewards, so
Speaker 3: it's a cash reward, the home purchase incentives, and they're
Speaker 3: also giving mothers a bunch of fresh flowers, a one
Speaker 3: time taxi ride and all these a card also you
Speaker 3: know to say well done, to heal a child. You know,
Speaker 3: it's all these really really innovative ideas that the local
Speaker 3: governments are doing in order to try to lure people
Speaker 3: to have more children.
Speaker 2: How much do you think the flowers and cord helped.
Speaker 3: I think the flowers would help a little bit because
Speaker 3: it's you know, showing a bit of appreciation, but definitely
Speaker 3: I would rather take the cash. To be honest, monthly
Speaker 3: monthly monthly monthly cash is very good. And also I
Speaker 3: think beside the monthly cash is you know, the childcare system.
Speaker 3: Who's going to look after the child when you go
Speaker 3: back to work. I think it's the whole integrated system
Speaker 3: that the government or the various local governments are trying
Speaker 3: to fix. So these are some of the other innovative
Speaker 3: ones we've seen. Is you know, having childcare support, the
Speaker 3: crash open for a little bit longer, all these various
Speaker 3: supportive measures just to help the parents in order to
Speaker 3: have the kids.
Speaker 2: This is a really interesting case study that you mentioned.
Speaker 2: Do you know why it worked in that particular region
Speaker 2: but not elsewhere in China Because it's not just that
Speaker 2: one government that's been dolling out cash so to speak.
Speaker 2: This has been a few years now, you know, it
Speaker 2: started with disassembling the one child policy and then since
Speaker 2: then it's become basically a three child policy. The government
Speaker 2: has been very vocal about it, and local governments have
Speaker 2: been given cash subsidies at marriage at the point of
Speaker 2: you know, getting married, as well as baby bonuses and
Speaker 2: childcare subsidies and things like that. So do you have
Speaker 2: a sense of why it particularly worked in this place.
Speaker 2: Is it to do with the population maybe, or how
Speaker 2: maybe all these things are tied together.
Speaker 3: I think firstly, when you look at Tienman as a
Speaker 3: standalone case study, when you look at the birth rate
Speaker 3: for the past ten years, the city has been declining,
Speaker 3: so this is a V shape recovery from the bottom,
Speaker 3: so there's a base effect as well, so that's the
Speaker 3: first thing. Secondly, I think it all ties together with
Speaker 3: maybe that's the timing of such that there was the
Speaker 3: COVID delay in terms of having baby, the year of
Speaker 3: the dragon, plus all these different bonuses coming all together
Speaker 3: at the same time that stimulate the I was called
Speaker 3: the demand for babies in terms of other cities and
Speaker 3: other provinces, and correctly point out as you have done this,
Speaker 3: so they have been increasing the subsidies maternity leaves, paternity
Speaker 3: leaves or those for the past decade already and yielding
Speaker 3: limited impact. I think it could be the amount, so
Speaker 3: it's actually how much you're being subsidized, as well as
Speaker 3: maybe just the population was the pen of demand.
Speaker 2: So overall, basically we shouldn't be reading into this as
Speaker 2: a sign of more positive growth. To come In other words,
Speaker 2: you know, you did a deep dive on this data,
Speaker 2: you know, going back a year now, and you pulled
Speaker 2: sort of provincial statistics and you came out with incredible
Speaker 2: array of charts. I really wanted to ask you this
Speaker 2: question just in terms of like your your overall findings, right,
Speaker 2: which is that all of this data you crunched and
Speaker 2: you found that the government probably won't be able to
Speaker 2: reverse this. Why did you come to that conclusion overall?
Speaker 2: You know, it's a big question.
Speaker 3: It is a very big question. Then you have correctly
Speaker 3: somethed of my research as well. I believe that the
Speaker 3: baby bus is irreversible. I think it will be a
Speaker 3: very tall order for them to reverse. And that's not
Speaker 3: only because you know they have done a lot of
Speaker 3: things cash bonuses trying to fix the overall system. I
Speaker 3: think that could help the baseline. But in terms of
Speaker 3: the incremental increase of population, I think it is very
Speaker 3: difficult because of the cultural shift. If you look at
Speaker 3: the youngster these days, what are they focusing on self love,
Speaker 3: self fulfilling and also trying to enjoy the moment. These
Speaker 3: does not go hand in hand with having children. Some
Speaker 3: people are saying Are these youngster being irresponsible because they're
Speaker 3: not procreating? But in my view, I think they're actually
Speaker 3: being more responsible because they they struggle to see their
Speaker 3: own future, especially given the current job environment. They can't
Speaker 3: see beyond maybe even next year. Are they still going
Speaker 3: to have a job, Are they still going to have
Speaker 3: money on the table? Is this the right time for
Speaker 3: them to bring a life to earth? And you have
Speaker 3: to support them going forward. And this is not a
Speaker 3: one time item. This is ongoing maybe eighteen years if
Speaker 3: you're lucky. But if the child decide to continue studying university,
Speaker 3: you continue pushing and then when they have children, you
Speaker 3: still need to give the highly if it's a man,
Speaker 3: so you still need to have that kind of gift
Speaker 3: for the bride's family. So you need the house, you
Speaker 3: need the vehicle, you need everything. Everything is money. So
Speaker 3: are the youngster being irresponsible? I don't think so. I
Speaker 3: actually think they're being very responsible because they can't see
Speaker 3: their own future. And in order for them to fix
Speaker 3: it at the government level, I think the fundamental is
Speaker 3: to fix the economy so that you get the economic
Speaker 3: maybe the wealth effect coming.
Speaker 1: Through before for the listeners outside of Asia, usually the
Speaker 1: man has to provide the house and the woman has
Speaker 1: to provide everything inside the house. Is that generally how
Speaker 1: it works.
Speaker 3: Yeah, I think generally how it works, but of course
Speaker 3: the society has changed these days. So also what happened
Speaker 3: is the men typically have to give the taily, which
Speaker 3: is a monetary amount, as a gift to the wife's family.
Speaker 3: So these ranges between the provinces in terms of monetary value,
Speaker 3: but it can be quite a lot. So we've done
Speaker 3: a research. When we look at Haylong Jiang, the highly
Speaker 3: amount on a per annual GDP basis is three hundred
Speaker 3: times of the families. It is very expensive as a
Speaker 3: province on the northern side of China, that's the most expensive.
Speaker 3: But it is in our research that we have ranked
Speaker 3: them according to the GDP because absolute amount, I think
Speaker 3: Beijing and shang High on the largest city you will
Speaker 3: see the largest amount, but if you look on a
Speaker 3: per GDP level, that is actually the province with the
Speaker 3: highest taily amount.
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Speaker 1: aida to what extent do you think this is a
Speaker 1: self inflicted problem? Because China had a one child policy
Speaker 1: for so many years and they only recently rolled that back,
Speaker 1: And we've seen a generation of families used to having
Speaker 1: a really small family like three people, like two parents
Speaker 1: and one kid. Can cultural value suddenly change so quickly
Speaker 1: to have a larger family.
Speaker 3: Yes, And I think if you look at the world
Speaker 3: one child, two child, three child policy, it took them
Speaker 3: thirty seven years to move from one child policy to
Speaker 3: two child policy, and it only took them five years
Speaker 3: to say maybe we need more children, so now it's
Speaker 3: three child policy. But culturally, I think it is very
Speaker 3: tricky because you're not use or the parents that supposingly
Speaker 3: parents now they're not used to having large families, so
Speaker 3: you're not used to having a lot of cousins. It
Speaker 3: is not in the culture. They're not growing to have,
Speaker 3: you know, share their stuff with other people, so it
Speaker 3: becomes a very different dynamic versus you know, the Western
Speaker 3: world where maybe you're used to having at least two
Speaker 3: to three siblings. So I think culturally it is very
Speaker 3: difficult to reverse if you think about it. If you
Speaker 3: are if I can call it the product of a
Speaker 3: one child policy, you are the princess or the prince
Speaker 3: in your family when you get married. If you're the girl,
Speaker 3: will you want to pick up someone else's dirty socks?
Speaker 3: And if you are the men, why do I want
Speaker 3: to spend money buying your chanel bag when I can
Speaker 3: spend it on my gain. So it is all about,
Speaker 3: you know, I need to love myself because I was
Speaker 3: brought up to love myself and everyone loved me. And
Speaker 3: then it's very difficult in terms of the change that
Speaker 3: type of thought process.
Speaker 2: In my view, you've noted a lot of barriers here
Speaker 2: to increasing the birth rate and increasing the population. So
Speaker 2: there's the societal issues, there's the kind of cultural norms, economics,
Speaker 2: you know, the fact that you might not be increasing
Speaker 2: your income the way you like, You might not be
Speaker 2: able to afford a house. The property market is still
Speaker 2: in the red in China and economic growth is set
Speaker 2: to slow starting this year. So is there anything I
Speaker 2: guess that the government could do, Whether it's a policy
Speaker 2: or a systemic shift that would actually help to increase
Speaker 2: birth in fertility rates, or do you see this more
Speaker 2: as perhaps like a regional or just a global shift,
Speaker 2: because it's of course not just China experiencing population decline
Speaker 2: and this rapid decline fertility rates. You know, there's also
Speaker 2: South Korea, but there's also places like Italy. Even in
Speaker 2: the States there's been declining fertility for some years. So yeah,
Speaker 2: I guess is there anything the government you could do
Speaker 2: or is it maybe just a case of we need
Speaker 2: to find a way to slow down the decline.
Speaker 3: I think there are still some room for the government
Speaker 3: to maneuver. Given that they have in row the one
Speaker 3: child policy to child policy. They can definitely make it
Speaker 3: more strange for you to have children. I think that's
Speaker 3: one way of forcing people, But I think that is extreme,
Speaker 3: to be honest. I think the Chinese government is very
Speaker 3: careful in terms of how to implement this, and my
Speaker 3: view is that they will likely try to use incentives
Speaker 3: rather than strict policy measure to say everyone must have
Speaker 3: a child. I think incentive wise, it is one of
Speaker 3: the key performance indicator for most of the provincial governments
Speaker 3: to stimulate birth. So I think, you know, given that
Speaker 3: is one of these KPIs, I do believe that the
Speaker 3: provincial governments are likely to increase the intensity of these
Speaker 3: type of incentives going forward, so healthcare, maternity benefits, as
Speaker 3: well as protecting the family when they have children, so
Speaker 3: from you know, workforce equality and so forth. I think
Speaker 3: these are all measures that they can still do and
Speaker 3: still lots of room to improve. But going forward, I
Speaker 3: do agree with you. I think it's about, you know,
Speaker 3: slowing down the rate of decline. If you look at globally,
Speaker 3: it is natural for country once they developed a certain stage,
Speaker 3: to start declining in terms of population. It is almost
Speaker 3: like a natural way of working. Can they buck the trend?
Speaker 3: I think it is a little bitrick key.
Speaker 1: So I know, you came up with a detailed model
Speaker 1: forecasting China's population. How bad can it get over the
Speaker 1: next few years? Give us some numbers.
Speaker 3: Sure, So, based on our model, it could drop by
Speaker 3: almost fifty million people to one point three six billion
Speaker 3: people by twenty thirty five. This is our base case
Speaker 3: scenario where birth rate will continue to decline except for
Speaker 3: the years of the dragon. So we actually factor in
Speaker 3: the nuances of year of the Dragon, as well as
Speaker 3: our view on the marriage ray divorce rate, as well
Speaker 3: of death rate. So we do believe that this will
Speaker 3: continue to decline going forward.
Speaker 1: Fifty million, that's roughly the size of is that the
Speaker 1: South Korean population or is it any other numbers there?
Speaker 3: It is as big as.
Speaker 1: At one point three times the size.
Speaker 3: Of California one point three times.
Speaker 1: What's the implications for some of the companies and sectors
Speaker 1: that you cover, especially for the consumer space. It's got
Speaker 1: to be negative, right for some of them.
Speaker 3: Is negative, but we do see some positivity coming from
Speaker 3: it as well. So let's start with the negative. The
Speaker 3: easiest one is definitely the baby milk formula. We have
Speaker 3: seen the decline in terms of the baby formula demand,
Speaker 3: and that's just less mouths to feed and the competition
Speaker 3: is intensifying. We're also seeing dairy products, you know, under
Speaker 3: a bit of pressure in terms of the demand because
Speaker 3: once again less people drinking milk and consuming the product,
Speaker 3: so basically a lot of the mass consumer product, we're
Speaker 3: seeing that kind of demand decline. Even for beer as well.
Speaker 3: If we use Japan as a case study, beer demand
Speaker 3: has been going down because the population has been declining.
Speaker 3: So we're seeing those type of absolute number declining for
Speaker 3: you know, and drives the volume. But what we also
Speaker 3: see in terms of opportunity and that something maybe like
Speaker 3: past because people are swapping out babies for pets, They're
Speaker 3: still looking for companionship. Remember our topic of self love.
Speaker 3: They need the companionship, they need the experiment. So people
Speaker 3: are willing to spend on their pets instead of having kids.
Speaker 3: And I think with the pet's economy is still in
Speaker 3: the growth pace, so with the decline in population and
Speaker 3: people getting older and lonier, I think people will seek
Speaker 3: more companionship from that as well. Other areas of actual
Speaker 3: opportunities of course, what we call the silver hair generation
Speaker 3: traveling these older people now some of them are retired
Speaker 3: already but living with good pension. So what are they doing.
Speaker 3: They can still walk around, they're still healthy, they're living longer,
Speaker 3: so they are traveling a lot more, and we're seeing
Speaker 3: those types of segments being benefiting from this trend. The
Speaker 3: other one, of course is vitamins and supplement as well.
Speaker 3: People as they get older, they are more willing to
Speaker 3: spend to enhance the health and well being. So something
Speaker 3: like this is also a good area to look into.
Speaker 2: So on note, is it kind of a maybe a
Speaker 2: positive thing then that people are living longer. I mean,
Speaker 2: I know there's fewer people making purchases, but it sounds
Speaker 2: like if you're living longer, you're going to be buying,
Speaker 2: like you said, more vitamins, You're going to be traveling more.
Speaker 2: You might be doing more house reunnos. I mean, if
Speaker 2: you have the money, I guess yes.
Speaker 3: So I think the spending categories will change. The spending
Speaker 3: will still be there, I think, but it's just what
Speaker 3: they spend on. Right, So if you look at the
Speaker 3: most basic stuff, say, for example, drinks, soft drink, what
Speaker 3: are you going to drink when they get older, They're
Speaker 3: going to drink less fuzzy stuff, less sugar stuff because
Speaker 3: they're looking for healthier alternative. So now what we're seeing
Speaker 3: is a proliferation of no sugar, less calorie teas. So
Speaker 3: it's the categories that are changing. Alcoholic drink also lower
Speaker 3: alcohol content because people are looking for healthy alternatives. So
Speaker 3: it's about the shift in the categories rather than the
Speaker 3: shift in the spending that's interesting.
Speaker 2: So it's not necessarily, you know, as catastrophic as it
Speaker 2: might be in other parts of the economy, like I'm
Speaker 2: thinking of the labor market or the fears of you know,
Speaker 2: less ingenuity, less productivity. It sounds like, at least for spending,
Speaker 2: it's not necessarily a bad news story.
Speaker 3: Yes, And I think a lot of the spending will
Speaker 3: also go into healthcare and pharmaceutical as well. So as
Speaker 3: people ages, they naturally require more healthcare and pharmaceutical spending
Speaker 3: and all the related items as well, such as e
Speaker 3: commerce healthcare where they can you know, go online and
Speaker 3: then just purchase and get the things deliver to the door.
Speaker 3: So I think it's the purchasing behavior that is changing
Speaker 3: as well, so it's not all catastrophic. And if you
Speaker 3: look at a lot of corporate and the companies, they
Speaker 3: are changing already. They're starting to go into like the
Speaker 3: less sugar, the more online driven, more you know, focus
Speaker 3: on older people. You'll see even on the apps they
Speaker 3: have the elderly version apps because the writings are bigger
Speaker 3: and it's easier to navigate. So you have to adapt
Speaker 3: to that type of dynamics. And I think the sooner
Speaker 3: the corporate adapt to it, the better. What we have
Speaker 3: seen in say, for example, dairy companies or INFANTMOE companies,
Speaker 3: they are started to put more effort trying to push
Speaker 3: for the elderly milk market. So instead of having infant milk,
Speaker 3: we're having elderly milk.
Speaker 2: Oh, I've seen that actually.
Speaker 3: Correct, instead of baby diapers, you have elderly diapers. So
Speaker 3: it's all about maybe the same product but for different
Speaker 3: groups of audience.
Speaker 1: And is there any companies do you think that have
Speaker 1: done this quite well and quite aggressively.
Speaker 3: I think it's still in an early stage at the moment,
Speaker 3: to be honest. Most of the dairy company I've seen
Speaker 3: they have already started that and pushing, but the elderly
Speaker 3: milk part is still relatively small. I think they are
Speaker 3: definitely pushing, but it takes some time.
Speaker 2: Yeah, it's sort of that milk infused with specific vitamins
Speaker 2: and minerals.
Speaker 3: Correct for bones and joints.
Speaker 2: Yeah maybe, I mean that's probably targeted at me too.
Speaker 3: But I also think the trend is to start preserving
Speaker 3: your health or live a healthier lifestyle earlier. So if
Speaker 3: you see on social media likes so Hongshore and Daoing,
Speaker 3: a lot of the youngsters are going into this herbal
Speaker 3: tea and it's one of the one of the trend.
Speaker 3: Instead of them buying a bubble tea, they're buying these
Speaker 3: healthy herbal tea and there are chains that are starting
Speaker 3: now to sell those. So it is definitely a trend
Speaker 3: that is healthier alternative for healthier lifestyles.
Speaker 1: Yeah, there's definitely a silver lining. And we should also
Speaker 1: say as well, a lower population is also positive for the.
Speaker 3: Environment, definitely less carbon footprint.
Speaker 1: Yeah, Ada, it's been an interesting discussion. Thank you for
Speaker 1: coming on.
Speaker 3: Thank you very much for having me.
Speaker 1: You've been listening to Asia Centric from Bloomberg Intelligence. I'm
Speaker 1: John Lee in Hong Kong and you can find me
Speaker 1: on LinkedIn by searching John Lee from Bloomberg.
Speaker 2: Intelligence, and I'm cart to me Driva, also in Hong Kong.
Speaker 2: You can find me on LinkedIn.
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Speaker 1: This podcast was produced and edited by Clara Chen. Thank
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