China's Hukou and one-child policy reforms | Capital Group Canada | Insights

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VIDEOS  |  MAY 2019

China's Hukou and one-child policy reforms

Susan Dietz-Henderson, Capital's China affairs director, discusses reforms to Hukou (a residential registration system) and China's one-child policy, and industries that may benefit.

 

Susan Dietz-Henderson: Some of the other notable aspects of the reform agenda include the Hukou reforms and the one-child policy. As you know, the one-child policy has been a long-standing one. China now faces the problems and the challenges of an aging demographic. Only in recent times have they come back to the concept that it’s okay to have more than one child. About two years ago, they relaxed the one-child policy. Now, you can have two.

There were always exceptions to the one-child policy in rural areas. Farmers were allowed to have a second child, maybe even a third. If that first child was a daughter, because in terms of traditional rural practices, a lot of the heavy work needs to be done with the help of the farmers’ sons, so they were allowed to have a second child. The other exceptions were if you belonged to a national minority, you were also allowed to have a second child without having to go through some of the more challenging hoops to register that permission.

Now that policy is being extended to anyone in the population, you can have a second child. There was a slow pickup in taking advantage of that policy, but as far as I understand, in the last year, there’s been a noticeable increase in people’s plans to extend their families. Even newly-married are thinking about whether or not they are going to have two children or just one. This creates a lot of opportunities in terms of baby products, renovations of people’s apartments and housing to accommodate more than one child, redecorating when another one is on the way. These are great commercial opportunities for those sorts of industries.

There is also a huge premium placed on the best products for your child when they are newly born and when they are growing up. Milk products, for example. Making sure that they have the best, the most natural, the safest sorts of products means really big business for those sorts of companies, both in China and abroad.

One of the big challenges of the aging demographic in China is that there are less and less people coming on the workforce every year. As a result, it’s in the government’s interest to ensure that the labour market is as mobile as it possibly can be so that they can take advantage of the opportunities in different cities. Traditionally, that has been inhibited to a great extent by the Hukou system.

The Hukou is basically your residential passport. Depending on where your Hukou is registered, your residential permit is registered, that is where you’re going to enjoy the benefits of your retirement pension, free healthcare, free public education for your child. If you move cities, you won’t get free access to those sorts of services. You have to pay for them. That has been, traditionally in the early part of the communist era, a way of controlling the movement of population, knowing where everybody was. It was in a sense a form of social control. They are undergoing a lot of reforms in that regard and relaxing those restrictions on where you can be and where your Hukou can be.

It’s not so much about abolishing the Hukou system but allowing people to travel around the country and take advantage of the labour opportunities as they see fit. There are still restrictions related to the Hukou, but it’s a much freer and mobile environment than it used to be.

 

 

Susan Dietz-Henderson Equity investment analyst

Susan Dietz-Henderson is the china affairs director at Capital Group. She has 31 years of diplomatic experience and has been with Capital Group for 11 years. Prior to joining Capital, Susan was the Australian Consul-General in Shanghai, an assistant secretary for the Australian Department of Foreign Affairs and Trade in Canberra, and had other diplomatic postings in China, the United States, Australia, and Papua New Guinea. She holds a diploma in applied economics from the University of Canberra, a bachelor’s degree in arts and Asian studies from Australian National University, and a diploma in applied linguistics and translation from Wycliffe College. Susan is based in Beijing.


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