News & Bulletins

Huaxin Capital View: China's Population Data and Policy Analysis

1、 Events

1. On May 11, 2021, the National Bureau of Statistics released the data of the seventh national population census. In 2020, China's total population reached 1.41 billion, an increase of 5.38% over 2010, with an average annual growth of 0.53%, but slightly lower than the average growth rate of 0.57% in the previous decade. From the perspective of age composition, there are two major population trends in China: 1) The aging trend is intensifying: the proportion of the elderly population in China will increase by 5.44 percentage points in 2020, the proportion of the population aged 65 and above will increase by 4.63 percentage points, and the dependency ratio of the elderly population will decline from 8.16 in 2010 to 5.08 in 2020; 2) The birth rate declined: in 2020, 12 million people were born, the birth rate was 8.50 ‰, a further decline compared with 10.48 ‰ in 2019. The birth rate fell for three consecutive years, and the birth rate in 2020 was the lowest since the data existed in 1952.
2. On May 31, 2021, the Political Bureau of the Central Committee of the Communist Party of China held a meeting. The meeting had three main contents. First, it actively responded to the aging of the population, emphasizing the implementation of the "National Strategy for Actively Responding to the Aging of the Population"; second, it accelerated the promotion of the three child policy. It pointed out that the three child policy is conducive to improving China's population structure, maintaining China's human resource endowment advantages, and requires "organizing the implementation of the three child birth policy according to law", This means that the three child policy has entered the implementation preparation level, and the progress exceeds the market expectation. Third, relevant economic and social policies should be coordinated, including the inclusive childcare service system, promoting education equity and reducing education expenditure, strengthening support policies such as taxation and housing, and protecting the legitimate rights and interests of women in employment.

2、 Data analysis

The proportion of the labor force population aged 15-64 in China reached a peak of 74.53% in 2010, and then began to fall back. In 2020, the proportion of the labor force population dropped to 68.55%. At the same time, the proportion of people aged 65 and above has continued to increase, from 8.87% in 2010 to 13.5% in 2020, which is close to the standard of a deeply aging society of 14%. Ning Jizhe, director of the National Bureau of Statistics of China, said that the aging of the population has become an important trend, which is also the basic national conditions of China for a long time to come.

In terms of the birth rate, in recent years, China has successively launched two separate child and comprehensive two child policies, but after a short outbreak, the fertility rate tends to fall back gradually again. The second year (2014) after the implementation of the policy of "two separate births", about 500000 new babies were born nationwide. In the second year (2016) after the implementation of the policy of "comprehensive two child policy", nearly 1 million new babies were born nationwide, but the number of new babies continued to decline in 2017. According to the census results, about 12 million babies were born nationwide in 2020, and the female fertility rate was 1.3, lower than the international warning line of 1.5, and far lower than the normal replacement rate of 2.1 required by the internationally recognized population balance. The population situation is very serious. In addition, in the past two censuses, the government has made great efforts to admit the super born population under the previous one-child policy into the standardized household registration system. If this realistic factor is excluded, the actual population growth rate of China in the past 20 years is lower than that shown in the statistics.

In terms of the number of children born, in recent years, the proportion of second children among the population born due to policy adjustment has risen from about 30% in 2013 to 59.5% in 2019, and more than 10 million more children have been born in China. It can be seen from the above that the main reason why the total number of births fell more than expected is that the number of births of one child fell more than expected. Although the comprehensive two child policy has led to an increase of more than 10 million new born people, as long as the birth rate of one child continues to decrease, the downward trend of the number of newborns in the country will be difficult to reverse.

The release of three births is expected to improve fertility in the short term and release potential fertility demand. However, in the long run, the three child policy is difficult to change the situation of the declining number of newborns in China, and the effect of the policy still needs to be observed.

3、 Industries that may benefit in the short term

According to historical data, the opening of the three child policy and the gradual promotion of supporting policies in the future can still curb the downward trend of the birth rate in the short term, thus stimulating the demand for related maternal and infant consumption, and benefiting companies such as milk powder, children's clothing, childcare, maternal and infant services, and medical care.
1. Maternal and infant industry: The demand of infant formula milk powder, infant diapers and other nursing supplies, maternal and infant clothing and other industries is highly related to the number of newborns. Hong Kong stock related targets: China Feihe, Mengniu Dairy, Heng'an International, Goodchild International, Anta Sports, etc.
2. Assisted reproduction industry and post natal service industry: The opening of three births will bring more elderly people of childbearing age, and the assisted reproduction industry will meet more demands. In addition, the demand for maternity centers after delivery will also increase. Hong Kong stock related targets: Jinxin Reproduction, Emperor Aidi Palace, etc.
3. Medicine: The demand for pediatrics and children's medicine has increased. Relevant subject matter of Hong Kong stock: None.


Note: All the listed companies mentioned are only part of the analysis and research and do not constitute any investment recommendation.

4、 Changes and effects of fertility policy in the past decade

The birth population in 2010 was 15.88 million;
In 2011, the policy of "double only two children" was released, and the birth population was 16.04 million, relatively stable, with a small increase of 160000;
In 2012, the birth population was 16.35 million, an increase of 310000, relatively stable;
In 2013, the "single second child" policy was liberalized, with a birth population of 16.4 million, an increase of only 50000, and the effect was delayed;
In 2014, the birth population was 16.87 million, an increase of 470000, and the effect of "two children alone" was delayed;
The birth population in 2015 was 16.55 million, which declined for the first time since the 1990s;
In 2016, the "comprehensive two child" policy was implemented, with a birth population of 17.86 million, an increase of 1.31 million, the largest since 2000;
In 2017-2020, the number of births was 17.23 million, 15.23 million, 14.65 million and 12 million respectively, decreasing year by year, and the decline in the past two years was significantly expanded.

5、 Our view

The population data of China in the past 10 years and the historical experience of Japan and South Korea show that in the long run, the number of newborn babies in China has declined year by year, and the overall population aging trend is difficult to reverse. In terms of investment, it is more important to look for long-term benefits from changes in population structure, improvement of overall quality, regional distribution trends and social needs of the elderly, rather than short-term positive incentives brought about by specific policy adjustments. Looking ahead, in the face of China's huge domestic demand market, clear investment areas include: (1) medicine and medical service industry; (2) Leading consumer goods companies benefiting from population urbanization, consumption upgrading and industry concentration improvement; (3) Industrial automation, service automation, agricultural automation and other industries that solve the problem of labor shortage, especially low-end labor.

In addition, this year, due to the mass vaccination of the new crown vaccine and the remarkable improvement of people's awareness of eugenics, the number of newborns in China may fall precipitously this year. Of course, next year, if there is no need to vaccinate the new crown vaccine, there will be a retaliatory rebound. Therefore, in terms of investment, it is necessary to avoid companies whose main business income is highly positively related to the birth population in the short term.