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Can Beijing Halt the Impact of the One-Child Rule?

August 28, 2014
By: Fran Howard, Contributing Writer
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China’s population will begin to shrink by 2030. How will that affect the outlook for its now-robust dairy product demand?

Despite a disappointing first read on China’s more liberal one-child policy, dairy product demand will continue to grow in China as more people enter the middle class.

By loosening China’s one-child policy to allow couples to have a second child as long as one parent is an only child, central planners in China expect roughly half of the estimated 11 million eligible couples to have another child within the first five years following the policy revision. Six months into the new policy, however, only 3 percent of eligible couples had applied for permission to have a second child.

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"Would-be parents in China are deterred by an onerous application process and the high cost to raise a child," says Sarina Sharp, agricultural economist with the Daily Dairy Report, Chicago, Ill. Credit Suisse estimates that the cost of child-rearing consumes about 43 percent of an average household’s income in China.

Soon to be on the decline

While central planners in China are not trying create an actual baby boom, Sharp says they are hoping to slow the country’s inevitable decline in population.

"China is trying to avoid becoming like Japan, with a quickly aging population and no hope of growing the workforce," says Sharp. "At best, China’s demographics will be like those in much of the developed West, where the workforce is growing despite a contracting population because women are choosing to have children later in life and are working for a greater portion of their lives."

The United Nations predicts that China’s population will begin to shrink by 2030 after years of slowing population growth. Even so, demand for dairy products in China should continue to be robust.

China’s rapidly growing economy coupled with its strong population growth has pushed dairy consumption skyward. Over the past five years, China’s skim milk powder consumption has grown from 124,000 metric tons in 2009 to an estimated 379,000 metric tons this year, according to USDA. Whole milk powder consumption has climbed from 1.064 billion metric tons in 2009 to an estimated 2.248 billion this year, and fluid milk consumption has increased from 11.79 million metric tons to 15.15 million. USDA does not provide consumption data for cheese or butter in China because they are consumed in much smaller quantities.

Africa Unlikely to Take China’s Place

Sharp questions whether growth in Africa and other developing countries will be able to offset declines in China longer term. "There will certainly be more people in the world by the time China’s population begins shrinking outright," she says. "The question is whether people in the world’s most rapidly growing nations will view dairy products as an affordable part of their diet or a luxury."

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