Chinese Market Ages

April 8, 2010

Although China’s market potential is unmatched, the aging of its population presents marketing challenges, according to The Nielsen Company.

Population Growth Slows, Will Shrink
Greater China today accounts for nearly one in five persons living on the face of Earth, almost 1.4 billion people. Shanghai alone has more than 17 million people, more than live in the US cities of New York, Los Angeles, and Chicago combined.

However, the fertility rate in China has dropped by more than 70% from 1950 to 2010, compared to a roughly 50% drop in the global fertility rate during that era. According to the Chinese government, the one child policy, instituted in 1979, reduced births between 1979 and 2000 by more than 250 million.

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China has gone from a country with a population in line with the average for the less-developed world to one more aligned with the more-developed world. Current fertility rates in China are a bit below 1.8, while those in the more-developed world average just more than 1.6.

Population growth in China has been arrested, from year-over-year percent increases of 3% in the 1960s, to falling below 1% per year by 1997 and estimated to fall below 0.5% per year by 2017. The United Nations estimates that China will stop growing entirely by around 2032, and will then begin to shrink.

The more-developed countries in the world have been growing very slowly for some time, but China’s growth rate will fall below the average for the more-developed world in less than 20 years. By around 2028, India will surpass China in population and become the world’s largest country.

Chinese Population is Aging Rapidly
As a consequence of China’s one-child policy, its population is aging at an accelerated pace. Two years from now, the share of the Chinese population younger than the age of 20 will fall below the same share in the US, and will continue to fall for the near future. Today, the median age for the U.S. is 36.6 and China is 34.2.

As the share of children falls, the share of older persons will rise. For China, population aging will hit much more quickly than even in parts of the more-developed world. In around 15 years, the median age in China will be older than in the US.

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China’s State Population and Family Planning Commission has recently said the one child policy will remain in force until 2015, but in prior announcements have suggested it could last at least five years longer. Regardless of when the policy might be altered, it will take decades of large increases in fertility and decades after that for the aging of China’s population to be reversed.

Suggestions for Marketers
Nielsen advises that a mix of brands targeted to different demographic groups, or those that work well in India or other less-developed nations, may struggle in China. Large families with children, typically the biggest market segment available in the less-developed world, are nonexistent in China. Very few households have more than two children and those with one greatly outnumber those with two.

As the Chinese population ages, household sizes will continue to shrink and the share of households that have children will continue to fall. This means less variance in the buying rate for products that rely on use by multiple family members for volume. Gaining new users and the retention of current users will be far more important strategies than seeking to grow volume within existing users.

Lessons marketers learn in the more-developed world about targeting older consumers should pay dividends in China. By around 2038, there will be as many persons older than the age of 65 in China as there are younger than the age of 20. After 2038, older consumers will outnumber younger ones. Marketers who can tap these older generations could do very well.

Marketing across the Generations
Previously compiled advice for marketers seeking to target members of the US Baby Boom (ages 45-63) and Greatest (64-plus) generations may also prove helpful for marketers targeting China’s aging population.

Greatest Generation: Freebies and senior discounts to appeal to their value orientation. This means special products addressing aging issues and special packs for smaller households. Stores should offer better signage, more forgiving package design, on-shelf or on-cart magnifying glasses.

Boomers: Keep these big spenders happy with monthly or quarterly cash-back savings programs that reflect spending levels. Pursue the upsell into prescription medications, insurance, gifts for grandkids and kids, entertainment and travel.

About the Data: The Nielsen Company used data from the “United Nations Population Division World Population Prospects: The 2008 Revision” and the Washington Post in creating this analysis.

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