For the past 37 years China has had strict rules enforced throughout their entire country. These laws stretch far and wide and are well known throughout the world and it pertains to their population. The law in question is the famous and official “one-child” policy. This law imposes heavy fees and taxes on families who choose to go against the status quo. Even resorting to abortions and forced sterilizations to punish families that go over the limit of children.
Economically speaking this law has influenced the land tremendously. It has lowered domestic consumption and put China in a place where exports became their mainstay of becoming an economic power and put them to where they are today. Times are changing now as the government has just announced plans to turn the one child policy into something more and increase it to a “two-child” policy. On January 1st of 2016 the law went into effect and now allows for Chinese couples to have two children.
Holdovers from Previous Law
The one child policy was enforced throughout the country for over thirty years and there will many policy holdovers from the initial law. Couples who were able to afford it were privy to having more children if they could pay the posted fees for having more children. These fees are methods for local authority to pull in money like a sort of tax. Local governments rely heavily on family planning fines.
In all of China’s 31 provinces they reportedly made around 20 billion Yuan or $3.2 billion. The ability to enforce the collection of these fines is a huge endeavor and requires around half a million people working for the department that deals with family planning. It would come as no surprise if the government will still be seeking out families who attempt to have more children and fining them heavily as they rely on these fines.
Long Term Domestic Growth
China’s long-term domestic growth is going to be affected in a number of ways that also relate back to the rest of the world. China is going to become more dependent on domestic consumption. As they rely less on their export based economic model and more so on the new boom that will happen with increased children in China. This will reach out to the entire world economy and investors as well.
Right away there will be a rise in domestic consumption. China’s industries are not necessarily equipped to deal with this and that's where foreign companies come into the picture. The United States for example has dealt with these growth for almost a century now after the baby boomer generations and large amounts of family. The infrastructure and business plans are all there. America knows what to do in a consumer economy and it could almost be a reverse in roles as China relies heavily on America and other developed western high population nations to catch up with their new domestic growth. This will be a great opportunity for U.S companies who produce household products and other services of that nature.