Demographics – the makeup of a given population – can have a huge impact on an economy and different industries. And a major demographic event is taking shape in China right now. For investors who can see what’s happening, it presents a major opportunity.
There are currently about 385 million people in China who were born after 1980. That means there are more people in China aged 37 or younger than the entire populations of Russia, Japan and Vietnam – combined.
Lee Ainslie's Maverick Capital had a difficult third quarter, although many hedge funds did. The quarter ended with the S&P 500's worst month since the beginning of the COVID pandemic. Q3 2021 hedge fund letters, conferences and more Maverick fund returns Maverick USA was down 11.6% for the third quarter, bringing its year-to-date return to Read More
They have been dubbed the balinghou (???), which literally means post, or after, 80. They are the generation born after China’s one-child policy came into effect in 1979 (and was phased out in 2015). The group also includes the jiulinghou (???), or post 90 generation.
These are not the grown up “starving kids in China” your parents told you about when you refused to eat your vegetables. They’ve never dealt with widespread famine, or the disastrous consequences of the Great Leap Forward and the Cultural Revolution.
Most of them grew up in a city and have only known a world in which their economy gets stronger and stronger. As shown below, China’s GDP in 1980 was US$191 billion. By 2015, it had grown to US$11 trillion. In other words, this generation of Chinese grew up during the time when China’s economic production grew by nearly 5,700 percent.
Many of them are the only children in their families (China’s one-child policy applied mostly to urban dwellers. Rural parents could have more than one child). That means they had up to six adults doting on them growing up – their parents and two sets of grandparents. They are the grown up “little emperors” the one-child policy created.
As such, many, but not all, of them had the best clothes, ate the best food and went to the best schools their families could afford. They are now in, or entering, a workforce that has enjoyed growing wages for decades and has more disposable income than ever before.
The balinghou are not just the spoiled super-rich kids we may hear about on the news. They’re an emerging “spending class” that want the good life. And with a population of 385 million, they can’t help but have a major impact on China’s economy.
Baby Boomers and the balinghou
The balinghou could be compared to the Baby Boomers in the U.S. (only in China, it’s been the opposite of a baby boom since 1979).
The Baby Boomers are Americans born in the post-World War II boom years up to about 1965. Between 1954 and 1964, more than four million babies were born each year in the U.S. By the time the boom started to fade in the mid-1960s, there were about 76 million boomers making up 40 percent of the U.S. population.
This population bulge has had an impact on just about every aspect of American life for the past 70 years – everything from popular music to cars to stock market performance… and now pension and health care issues.
Something similar could happen in China because of the balinghou generation. As I said, they are 385 million strong (about 28 percent of China’s total population) and are the dominant group in China’s booming middle class.
And just like investors who rode the U.S. baby boom wave to huge gains, smart investors have the opportunity to profit from this generation of Chinese consumers. Go here to find out more.