China in Numbers

Reflections after the 2010 Population Census

By Angel Fernández de Castro de Léon.

Just few days ago the National Bureau of Statistics of China released very interesting information regarding to the most recent 2010 National Population Census. Considering that this comes once every decade, and that we are considering not just the most populous nation over the globe, but the second largest economy of the world, we should perhaps take a little interest…

China, the Napoleonic Giant that woke up thirty years ago and transformed itself from impoverished communist state in to an economic superpower, has overtaken Germany as the third major economy in 2006, hijacked the second position from Japan in 2010 and in the short term[1]… in a blink of an eye, they might do the same with USA (pole position) during the next decade. Yes, we will definitely witness it… But, what are those major demographic drivers that are shaping this new Chinese demography to face the coming decades? Hopefully, with a brief outlook on the new tendencies, we will grasp some hints to interpret them, and if we are attentive and smart enough, we could taste the opportunities that are still hidden in China, not just as a provider, but as a net consumer for world’s first-class outputs…

First and most obvious feature: 1’330,724,852 inhabitants in mainland [2]. Is it huge? It’s immense! China represents 20% of the world´s population (6.8 billion); 4.3 times US population, 1.55 times the European Union and 2.3 all Latin American countries together (including Brazil and Mexico). There is something we should always keep in mind: population means workforce. Which are the emerging economies in a globalized world? Those with big populations… big enough to become world´s suppliers: China (1.3billion), India (1.2billion), Brazil (191million), Russia (142 million), and in a lesser extent Mexico, Turkey and South Africa (111, 78 and 50 million respectively).

Population matters, but it is not the only factor itself. Capital is indispensable (usually in form of FDI), but there are another two drivers –usually underestimated- that are essential to achieve the major economic transformation from an impoverished state to a superpower: economic disparity among regions and territory. A country could substantially benefit from the advantages of their own internal population flow, when the economy bias between regions is significant. Why? Because the population flow grants cheap -although usually unskilled- workforce to the factories, and what is even more important, it keeps wages down. What would happen if suddenly the workforce becomes scarce, below the factories demand? Salaries would increase; benefits would instantly drop down and eventually the game would be over: you had handed out your competitive advantage to the next player… unless you make use of immigration (US-Mexico, Germany-Turkey) or you conduct your own “migration” from far and undeveloped zones to industrialized areas. This is the cornerstone assets in China, and its government has mastered it over the time.

According to the 2010 Census, the total floating population (people that had left home for more than six months) in China is 221.4 million [3]. This equals to say that Brazil´s total country´s population has migrated in a territory as huge as their own. Size matters. As long as you have a constant inflow of low waged and unskilled labor, while other variables remain the same, your cost-efficient advantage will remain safe. But migration also means income remittance, poverty reduction and higher living standards for the rural areas. Eventually, those people back in their remote birthplaces –which a decade ago were cut off the market maelstrom- will take part of the consumerism mechanism that is already summing up the 221 million that have left their poor homes. Nowadays nearly half of the population (49.7) lives in urban areas, showing the rapidly urbanizing of China. Another peculiar data that allows us to perceive this transformation is by education itself. In 2010, the number of people with a university education was 8,930 per 100,000[4]; almost 2.5 times more than in 2000, when it stood at 3,611.

So, what do we have here? A country with a rapid urbanization, speedy rise of education standards, and a constant inflow of emerging middle and wealthy class that will demand more and more high-end products. In China, moving forward from the bicycle to the Mercedes Benz is a reality. I have seen dozens of factory bosses, who speak not one single word of English and lack the most basic refinement, but offer me expensive cigarettes and drive me to luxurious restaurants in their BMW, Volvo or Mercedes. It’s difficult to say, but sometimes by the appearance it’s even more difficult to judge whether the person is the driver or the big boss himself until he introduces himself to you.

In the other hand, China still has a surplus of cheap workforce and an immense economic disparity between areas. Let’s remember that half of his population is rural, but 99% of the poor live in rural areas (or come from there) and they just possess 12% of the country wealth [5]. Moreover, 66% of the poor are concentrated in the western regions; therefore, the flow of labor coming from west-rural to the urban-east will be assured for the years to come. The annual income in China´s cities, which is more than three times the average income in the countryside [6], will keep feeding factories with cheap labor, because of the enormous imbalance. Two years ago I visited Xinjiang (farthest western province) and I was amazed about the prices compared to the most cosmopolitan Shanghai (4,000 km away to the East). Just one brief example: the starting taxi fare in Urumuqi (capital of Xinjiang) was $5RMB (USD$0.76) while in Shanghai was $13RMB (USD$2.00) at day and $15RMB (USD$2.30) during the night shift.

As we see, the polarity among regions is huge: west-east, urban and rural. I do agree with what a customer once told me while visiting Shanghai: “China is a third world country with first world cities”. Indeed, there is a lot of money in the cities. Therefore, China offers a unique paradise for those that can set their eyes in China as a high-end market. For 2008 there was a middle class of 150 million[7], China is just followed by US in the number of billionaires in the world[8] , China is world’s second largest consumer market for luxury goods, behind only Japan (after passing the U.S. in 2009)[9] and by 2020, China’s global share of the luxury market will triple to 44% if luxury goods bought by Chinese outside China are included with domestic purchases. This explains how it´s possible that a “third world nation” accounts of important global sales shares of Triple-A brands such as Swatch (28%), Richemont (22%), Gucci (18%), Bulgari (14%) and Hermes (10%)[10] or how to understand that Luis Vuitton has three stores just in Shanghai…

China: the multi-faceted reality. China: the paradise for multi-quality mass-production worldwide supply and the coming biggest consumer market for luxury goods. China: “The” previous step for the former first-comers, the present step for nowadays entrepreneurs, and the next step for the newbies to come. It will be difficult to defeat China in the short term. It will be interesting to keep track of its doings; meanwhile, take lesson from the statistics, open up our brain and eyes, and take the chance!

[1] The Guardian, China overtakes Japan as world’s second-largest economy, 14 February 2011.

[2] National Bureau of Statistics of China, Press Release on Major Figures of the 2010 National Population Census, April 28, 2011.

[3] Idem, National Bureau of Statistics of China.

[4] Idem, National Bureau of Statistics of China.

[5] The Telegraph UK, China‘s wealth gap the widest since economic reforms began, March 2, 2010

[6] China National Bureau of Statistics, 2008

[7] National Geographic, “China’s Middle Class” May 2008

[8] Forbes; Wikipedia “List of countries by the number of US dollar billionaires”

[9] Wikipedia “Luxury goods in the People’s Republic of China”

[10] The Economist “China’s luxury boom: The Middle Blingdom” Feb. 17, 2011

Sources:

Full text of China’s 2008 statistical communiqué of economic, social development