China is tightly interlocked with the world’s economies. The country so dominates global production that its health, demographic, and economic changes can impact businesses worldwide. That is particularly so for a toy industry that produces 86% of its products in that one country.
It is therefore essential to keep up to date with conditions in China. Of particular note is the decline in Chinese births. How bad is it? According to a Financial Times article by Eleanor Olcott and Frederica Cocco, “Baby bust: Pandemic accelerates fall in China’s birth rate,” China’s birth rate has declined 30%. Last year, China produced the fewest number of babies since 1949. According to the article, there are warnings that if things don’t turn around, China could have half the population it currently has by the end of the century.
China’s problems with its birthrate are not new. However, since the beginning of the pandemic two years ago, the drop in births has accelerated.
How does that impact the rest of the world? As the birthrate continues to drop, fewer workers are available to make toys and other consumer products. Those who are available will demand higher wages. As a result, there will be less capacity, and what capacity there is will be more costly.
As China’s population continues to decline, and all indications are that it will, we will face the challenge of where do we produce toys? Faced with fewer, higher-paid workers, Chinese factories will increasingly turn to making high-value products. Toys are not high-value products. Toy companies will be forced to reshore, nearshore, or seek alternative low-wage countries.
Keep an eye on China’s birthrate. It will have an impact on all of us.