China's Communist leaders have delivered a baby boom, but not the one they are hoping for. Diaper and dairy stocks jumped on news that the state will in future permit all couples to have two children. Though the birth rate may inch up as a result, it won't have much impact on China's ageing population and shrinking workforce.
The decision to relax the one-child policy after 36 years will affect roughly 90 million Chinese families, according to the government. Investors promptly rushed to find companies which would benefit from an influx of infants. Shares in baby formula maker Beingmate rose 10 per cent in Shenzhen, while French dairy giant Danone hit a five-month high. Shares in China Child Care, the Hong Kong group known for its Prince Frog baby shampoo and bath products, bounced 22 per cent.
Yet, the excitement is premature. Rural families, ethnic minorities, and couples that are both only children were already exempt from the existing rule. And previous changes to the policy have produced little response. In 2013, the authorities allowed couples where one parent is an only child to have a second baby. But of the 11 million couples that were eligible, only 1.5 million applied, according to state media. In wealthier, urban Beijing, the number was just 30,000.
More From This Section
Convincing educated, urban women to have larger families will be the hardest. In Shanghai the fertility rate - the average number of children born to each woman - is 0.7, well below the national rate of 1.7. The soaring cost of living in cities is one big reason why an increasing number of women choose not to have children at all. It will be harder to encourage Chinese mothers than it was to prevent them from giving birth.
