China's reform plan boosts kid-related companies

China's plan to ease the country's one-child policy is already having a positive effect on companies that make kid-related products.
Written by Kirsten Korosec, Contributor on

China's plan to ease the country's one-child policy—just one of several social and economic reforms floated after the market closed Friday—is already having a positive effect on companies that make kid-related products.

Global equity markets climbed today and Chinese shares listed in Hong Kong posted their biggest gain in nearly two years on news of the economic reform plans in China, reported Reuters. And baby goods and toy manufacturers were among those shares leading gains. 

China's new leadership announced Friday that couples can have two children if one spouse is an only child. Chinese manufacturer Goodbaby International Holdings Ltd and infant formula producer Biostime International Holdings were among several baby and kid-related companies that saw their share price rise today as the market reacted to the prospect of more customers (parents) buying those goods.

As I've written before, China’s one-child policy has created a lopsided demographic in the country, making it look a lot like rich Western nations. And for China, a country that doesn’t have the same buffer of wealth that industrialized nations do, this is not a good thing.

The country’s one-child policy initially provided an economic boost. China’s working age population rose in the past 20 years, pushing up incomes and productivity as young people headed into cities to work in factories. But the share of working-age folks has since declined and is expected to fall between 2010 and 2030 nearly as fast as in Japan, the U.S. and other developed, rich nations.

Two Citigroup economists, Nathan Sheets and Robert A. Sockin, issued a forecast in October predicting that China’s shrinking work force—and it’s growing senior population—is likely to trim 3.25 percentage points off the country's annual growth rate. 

Now that China's new leadership has laid out its reform blueprint that could all change. That is, if Chinese citizens can get over the cost of having more children. A survey on China's microblogging site Weibo found the majority of its nearly 26,000 users who responded a day after the reform plan was announced said they would have another child under the new rule, the WSJ reported. But roughly 37 percent said they would opt out, with some citing the expense of raising a child in China, where the cost of living has risen as the economy has boomed.

Thumbnail photo: Flickr user tsc_traveler

This post was originally published on Smartplanet.com

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