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If anyone at Mattel is paying attention, they should quickly get to work on a new series of Han Chinese Barbie dolls. One of the hoped-for consequences of the decision by China's leadership to ease up on its one-child policy could be a recovery in the female birth rate.

China's brutal population control policy has had many unintended consequences, one of which was the extension of a traditional gender preference for boy babies into gender implementation through selective fetal abortion. As a result of the skewed birth rate – China has 117 male births for 100 female – it is reckoned by 2020 there will be 35 million more men of marriageable age than there are women.

The 30-year old policy which restricted urban Han Chinese couples to one child is finally being chipped away, with enough exemptions to effectively make it a two-child policy. It may encourage greater tolerance of female babies but it will almost certainly bring about an expansion of consumer demand, another reform objective of the Communist Party. A higher birth rate should mean more sales of clothes, toys, domestic appliances, baby food and services to the expanding urban middle class.

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Unfortunately, the policy upheaval comes too late to deal with the demographic earthquake which is now emerging in China's labour force. Researchers at the IMF predict that China will reach a tipping point by the end of this decade where labour surplus will shift to labour shortage. There are signs that in urban areas, the transition has already occurred with rampant wage inflation, job-hopping and indications that manufacturers are beginning to invest more heavily in automation. Deutsche Bank forecasts that the Chinese workforce will shrink from 853 million to 781 million by 2030. If China is to avoid a damaging loss of competitiveness, it will need to shift rapidly to higher value manufacturing and services.

The irony is that China's rigorous fertility control was probably unnecessary. There is now ample evidence around the world that birth rates fall naturally as a result of urbanization, increased wealth and access to health care and the shift of working age populations from farm to factory. Since the mid-1980s, the birth rate of Bangladeshi women has declined from almost 6 live births to a rate of 2.2 today, which is barely replacement level. Urban living and television are highly effective contraceptives.

In China, however, female fertility is down to a rate of 1.6 births and it is doubtful whether the edict from the Chinese government will be enough to quickly change the habits and lifestyles of urbanized, ambitious Chinese women. While officious and bullying bureaucrats may be effective in shrinking family size, it is more difficult to reverse the process. Birth rates tend to increase in periods of stability where women are confident about the future. (It is a truism that the Russian government continues to ignore as it laments a catastrophic fall in the birth rate to 1.5 per female.)

Meanwhile, it seems probable that the Chinese factories to which firms such as Mattel outsource production of toys could lose their low-cost labour advantage. A future generation of Chinese girls may find themselves playing with Barbies made in Indonesia.

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