The challenges for women in China start from birth, where selective abortions have led to a skew in the number of baby girls born compared to boys. For every girl born, 1.15 boys are, significantly higher than the average of 1.06 worldwide[1]. This ranks at rock bottom in the Health & Survival category of the World Economic Forum’s Gender Gap study in 2018.

Decades of such practices mean that there are significantly fewer women in China than men – where estimates range from 30 million to 60 million.

Despite this, female participation in the economy is higher than the world average at 68.5% versus 53%. This is a legacy from the past when the Communist Party regarded female participation in the labour force as a key measure of gender equality. However, since 1990, the rate has slowly but steadily declined, to 68.5% in 2018 compared to 79.5% in 1990[2].

The urban female employment rate is lower than in the rural regions and decreasing. This points to a situation of heightened gender inequality in the workplace[3]. Since the start of the economic reforms in 1979, the gender pay gap has widened to 33% for urban workers[4].

In this series of diversity articles, we examine the dynamics of gender inequality throughout a woman’s entire working life, taking four key capital markets as examples.

Beginning with Germany and Japan, now China and later India, we identify the drivers of inequality, assess local company practices and highlight recommendations for investor engagement.

Watch: Why engaging men in the gender debate is key for greater corporate diversity

A broader context to bear in mind is the shift in demographics in China. It is a society which is aging rapidly. By 2050, a third of the population will be 60 or older – compared to 17% today[5]. Added to this, the fertility rate remains low despite the end of the one-child policy in 2016.

The birth rate of around 1.5 in 2018 was the lowest on record[6] and there is no sign of a baby boom any time soon. In a government survey, 63% of working women with one child said they didn’t want to have another[7], while 40% of childless respondents stated they didn’t want to have any. Reasons cited include lack of time, energy, income and concerns over career progression.

Aging demographics could reverse the gender inequality in the workplace due to shortage of labour

Aging demographics could reverse the gender inequality in the workplace due to shortage of labour. But on the flipside, the pressure for women to have more children, could potentially widen the inequality.

The population of China is expected to start declining in 2027. For companies, this demographic crisis will directly translate into a shrinkage of the working-age population and ultimately a labour shortage. One government study found that China will lose 100 million workers from 2020 to 2035, and an another 100 million from 2035 to 2050[8].

In the workplace: Rules ignored

Ensuring higher female participation in the labour market is key to mitigating the fall in workers. Access to stable employment will drive productivity, business activity, economic growth while easing the dependency ratio. However, there are several hurdles.

Read more: The Lagarde effect: Identifying true gender diversity in business

The pay gap has widened since the economic reforms for two main reasons. First, women appear to remain trapped in low-productivity, poorly-paid jobs. They have not benefitted as much as male workers have in the transition from an agricultural economy to a manufacturing and increasingly, service-based one. Also, as companies now have far more discretion on the pay of employees compared to the planned economy era, this is leading to gender-based pay discrimination.

Studies have assessed that the discriminatory factors account to approximately 60% to 86% of the estimated salary gap, even within professional occupations.[9] Highly educated women also encounter gender discrimination.

There is a spate of national laws aimed at combatting gender discrimination, but enforcement has been lacking. Job specifications with gender requirements are still ongoing. Also, the equal opportunities-related regulation is mitigated by other work place laws such as women having different retirement age to men at 50 to 55 years compared to 60 for men, which can limit their career progression and reduce their potential earnings and pensions. The expense of paid maternity leave, which is 98 days long, continues to be a disincentive for hiring women.

The investor engagement playbook in China

We believe companies which create a diverse and inclusive culture will be best positioned to cope with the looming talent shortage in China. To achieve this firms can play a role in supporting women – help stop them having to solely bear the burden of looking after the needs of both children and elderly relatives.

We intend to engage with Chinese companies around the following areas:

  • Accountability from the top management and board of directors with regards to equal pay and equal employment opportunities policies. This would help send a clear signal to the market that the company has set the foundation for combatting gender inequality in the workplace
  • Developing family-friendly policies (such as remote working) and infrastructures (such as childcare facilities) is essential to enable female workers to reconcile work and family duties.
  • The switch to a market economy has passed the childcare responsibility on to families, which has had a negative effect on female employment. Flexible working should be available to both men and women.
  • Quantitative data around the positions and roles women hold in the company. This includes statistics and/or targets around gender recruitment, which we deem important to ensure no discrimination at company-level in a country where employers are seemingly reluctant to hire women.

In this way, we hope to highlight areas where companies can make improvements to gender balance and improve diversity, ultimately in an effort to level the playing field for women. This would provide benefits to the companies themselves in terms of mitigating a growing shortage of labour and bringing additional skillsets, as well as contributing to the United Nations Sustainable Development Goals around gender equality and women’s empowerment.

Read more: Gender diversity in earnings calls: Why do men talk so much?

[1] World Health Organization

[2] World Bank database

[3] United Nations System in China, Gender Equality in China’s Economic Transformation, October 2014

[4] World Health Organization

[5] GB Times – China’s elderly population to peak at half a billion in 2050, 20 July 2018

[6] Reuters, Modern China’s birth rate falls to lowest ever, 21 January 2019

[7] Zhaopin Limited, 11 May 2017

[8] New York Times, Burying ‘one child’ limits, China pushes women to have more babies, 11 August 2018

[9] United Nations System in China, Gender Equality in China’s Economic Transformation, October 2014