China’s dynamic economy is creating a new class of rich young people clamoring to consume like their counterparts in the West. That, at least, is the commonly held wisdom. But it may lead businesses to overlook an entirely different age group which may hold the true prize – the old.
For years now, marketers may have ignored China’s demographic reality. They have aimed an increasing number of products at a shrinking youth population while bypassing less sexy but increasingly affluent older consumers.
“I was at an advertising agency’s presentation earlier this year, and everything they presented was aimed at people under the age of 24,” said Clint Laurent, who runs Global Demographics, a consultancy. “I just asked, ‘Why?’”
Global Demographics, which slices and dices numbers to give clients a peek at China 10 or 20 years from now, believes the one-child policy, combined with rising wealth and education levels, will create a population in which the old significantly outnumber the young in coming years.
Do the math
According to Laurent, between 2007 and 2026, the number of children aged 14 and under will drop to 69 million, or 29%, as an “age wave” peaking now in the 25-39 group grows older. In five years, the wave will move to the 40-plus category.
This means that a demographic Laurent describes as “working-age empty nesters” will become increasingly significant. These people will have more disposable income than other groups and, between 2007 and 2026, they will grow in number from 160 million to 211 million.
The importance of these working-age empty nesters became evident in 2000, when China’s National Bureau of Statistics conducted the fifth of its once-a-decade national census.
The 2000 figures show that the number of children aged four or under fell from to 60 million from 90 million in 1990. The net effect was that the number of youths – those under 15 – turned out to be much lower than previously thought.
But according to Laurent, this new and highly significant data did not have a widespread impact on marketers, many of whom still rely on old assumptions.
“Official reports have given [the new data] full cognizance all the time,” he said. “But it seems to have been ignored. People still assume there’s a huge number of young people coming onstream.
“The market is changing from lots of relatively young poor people who buy a lot of cheap products to a stable number of middle-aged, increasingly affluent people. That’s a totally different ballgame.”
One reason for this seemingly willful neglect of the facts may be that the United Nations has not yet updated its own population data. The UN still says, for example, that the number of children aged four and under was 96 million in 2000.
The implications for companies hoping to profit from Chinese consumers are far-reaching. On one hand, the working-age empty nesters will become increasingly important as consumers, but their demands may not be met. On the other, firms will face a lower-than-expected sales volume among youths.
Brands may find it difficult to adapt to the shifting demographics.
“[Adaptation] is very brand-specific,” said Liana Chang, a strategic planner at advertising agency Wieden+Kennedy. “Some brands will want to continue to focus on the youth market because it keeps them credible. Others may try to grow up with the demographic, but that’s a harder change to make.”
According to Chang, whose agency counts youth-oriented brands like Nike among its clients, fewer young people doesn’t necessarily mean less money. In Japan, for example, a declining youth population has corresponded with increasingly wealthy youths. Japanese empty nesters are still subsidizing their kids, boosting their spending power disproportionately.
“[It] has an older population but also a lucrative youth market because they’re still on their parents’ dole,” Chang said.
Even as the number of young people in China drops in the years ahead, Laurent still expects the value of the youth market to grow by 5% annually.
End of an era?
Beyond challenges to marketing, however, the new numbers could hint at a more fundamental economic shift: China may be running out of workers.
According to Laurent, the country’s economic growth has been predicated on a large supply of young workers and rising productivity. The supply of young workers is now almost exhausted and productivity gains are declining.
But Paul French, an analyst at research firm Access Asia, believes the picture is more complicated than that and any answer has to factor in the changing skill sets of China’s workforce.
“It’s not a doomsday scenario of China running out of people. It’s more a question of where the people are and what they’re doing – it’s a value more than a volume issue,” he said.