Leeds: Look Ahead to New Markets
Much has been written about the growth of the Chinese economy and its 1.3 billion consumers. This population growth, combined with unprecedented economic growth has resulted in China becoming a major customer for Iowa’s soybean farmers. But perhaps the bigger emerging story is the pending demographic crisis the Chinese face. Consider the following:
- The number of Chinese 19-22 years in age is expected to plunge from 100 million today to 53 million by 2019. A drop of 43 percent in 10 years.
- In 2009, the number of applicants in Chinese universities fell 400,000. In 2010, it decreased another 700,000.
- Due to selective abortion, for every 100 young women available for marriage, there are 120 men of similar age. By 2020, China could have up to 24 million young single men with no prospect of getting married or having children. This is a demographic distortion never before experienced in human history.
- China is the first country in history to have its population grow old before it becomes relatively well off on a per capita basis. The result is a country with lots of older citizens needing increased medical care and senior services with a dramatically falling number of young workers. How will China be able to provide for this massive number of elderly?
- To keep a society’s population sustainable, the birth rate needs to be 2.3 per female. China’s current rate may be as low as 1.3.
All of these issues are the direct result of China’s one-child policy, which the government claims has reduced their population by 400 million – a number larger than the US population. The reality is that China’s population will soon begin to fall like a rock. How does an economy that has been built on the backs of millions of low-cost workers continue to grow and expand? What happens when a society with closed borders has to begin encouraging immigration to meets its labor needs? How goes a government that seems to lay awake at night worrying about losing control of its citizens’ desires for more freedom manage this transition to a more open society?
So what does all this mean for the soybean industry? First, it is a reminder that we must continue to work to develop other markets for US soybean farmers. Our growing dependence on China leaves us extremely vulnerable to an economic “hiccup” in China. Second, and perhaps contradictory, it is important to understand that the largest driver of increased demand for soybeans is economic growth, not population growth. It is in our best interest that the Chinese successfully manage the transition to an economy with a falling population. If they somehow manage this challenge and if their per capital income continues to increase, they will remain the most important export market for Iowa’s soybean farmers for many years to come.