Nearly 35 years after it was implemented, China's Communist Party leadership has suddenly backed-off its "one child policy" of population control in the face of what many observers say is a dire and increasingly obvious need for more workers.
"The key is, China is not ahead of this. This is something they should have done a long time ago," says LPL Financial's chief market strategist Jeff Kleintop in the attached video. "China's working age population, according to U.N. projections, peaked last year which means the number of available workers in China is declining every year going forward for decades to come," he adds.
Kleintop isn't the only one aware of the problems that an aging population carries. It's has often been said that "China will grow old before it grows rich," meaning that it simply does not have enough young people to do the work needed to keep its enviable economic growth rate intact, or take care of its elderly.
To be sure, at 1.3 billion people, China is already the most populous nation on earth, and nearly four times bigger than the United States. But it is also one of the poorest. Statistics show that, at 0.5% a year, China is currently growing more slowly than 185 other nations.
While its economy may be the second largest, the average Chinese family still only earns the equivalent of $2,000 to about $5,000 a year, depending on if they live in a rural or urban environment. For its part, The World Bank ranks China 90th in the world with per capita income of about $6,100 a year, a number which is highly skewed due to a tiny portion of the population that has recently become extremely wealthy.
By raising the legal limit on babies from one to two, the Chinese government is in some respects acknowledging the problem and also unleashing the mother of all baby booms. And more babies means more of everything, not just workers needed to staff the country's hyperactive factories.
"Don't look to China as this huge producer anymore. There's a lot of other countries that will pick up that slack," Kleintop says. "They're really going to become the world's dominant consumer," he predicts, with a particularly strong appetite for U.S. goods and services, with one big caveat; intellectual property rights.
"The U.S. leads the world in intellectual property, and if China respects that, thrn that's a huge booming market for U.S. goods and services," he says. "If not, we may be facing some serious challenges ahead if they choose to violate those copyrights and trademarks and produce those goods themselves."
And so while more babies should ultimately fuel more growth, the full impact of China's new two-child policy won't be felt for years to come, both domestically and globally.
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