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China instituted its one-child policy all the way back in the 1980s, at a time when the population there was booming as many couples had multiple children. As China had not yet fully industrialised back then, there were worries that a surge in births would lead to shortages in food supply and shelter.
In 2015, China suddenly announced that it would be easing its one-child policy. Couples in which one parent was the only child were now allowed to have a second child. Given China’s overall population is rapidly ageing, it made sense to ease this policy and encourage a higher birth rate.
With China being so populous, even a small increase in birth rates is enough to trigger a major boom in newborns, with many expecting an influx of babies in the coming years. Here are three companies that stand to benefit from China’s gradual change in policy.
1. Goodbaby International Holdings Ltd
Goodbaby International Holdings Ltd (SEHK: 1086) is a parenting products company. The group develops, manufactures, researches, designs, markets and sells children’s strollers, apparel and accessories as well as feeding, nursing and personal care products. The group has 1,000+ self-managed retail outlets and employs around 12,000 employees worldwide.
With more babies being born, this should increase the demand for Goodbaby’s products. The group is a major player in the personal care products market and provides a wide range of children’s products. It should, therefore, enjoy many years of increased business should couples decide to have a second child.
2. Hengan International Group Company Ltd
Hengan International Group Company Ltd (SEHK: 1044) is the largest producer of baby diapers and sanitary napkins in China. The group also manufactures and trades skincare, food and snack products.
With a rising middle-income class and increased affluence, the Chinese can now afford to buy baby products, sanitary napkins, and diapers for their families and children. This trend will coincide with the increase in live births to enable the group to push its products through myriad retail channels.
3. China Mengniu Dairy Company Limited
China Mengniu Dairy Company Limited (SEHK: 2319) manufactures and distributes quality dairy products in China. The group is one of the leading dairy product manufacturers in China with its trademark MENGNIU brand, and the group’s diversified portfolio also includes products such as liquid milk, ice cream, formula milk, and yogurt.
As milk is a staple food for babies and young children, China Mengniu’s business should benefit greatly from the easing of the one-child policy. As more and more parents are able to afford formula milk, the group’s formula milk and liquid milk divisions will ultimately benefit.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Royston Yang doesn’t own shares in any companies mentioned.