Policy shift to give birth to new demand

For many Chinese couples, a policy shift permitting them to have a second child comes at a high price.

Li Yun and his wife are now looking for a bigger apartment where they can live with their 3-year-old daughter and their coming second child. With an annual income of 450,000 yuan ($74,000), the couple is making financial plans for other expenses, from child care to education.

"We understand there will be more spending when a second baby comes along, and we are preparing for that," said Li, a 34-year-old working at a government institution in Beijing. His wife is a manager at a foreign-backed company.

Zhao Ping, deputy director of the Department of Consumption Economics at the Chinese Academy of International Trade and Economic Cooperation, said that the new policy will stimulate major increases in spending on daily necessities.

"The additional 10 million newborns mean more demand for food, education and other child-related products," said Zhao. "The new wave of births will also mean more demand for places in some kindergartens and primary schools."

She said that, geographically, the impact will be more visible in first- and second-tier cities, where the implementation of the previous policy was stricter than in smaller cities and rural areas.

According to the Chinese Academy of Social Sciences, a leading central government think tank, 50 to 60 percent of the families that are eligible to have two children under the policy shift are willing to have a second one.

The National Bureau of Statistics has forecast that China is about to experience a fourth baby boom. People born during the 1980s and 1990s are going to marry and have children during the next five years.

Coupled with additional births from the policy shift, the number of newborns will reach 23 million within three years, and the number of babies below the age of 3 will increase 35 percent from current level.

The baby boom will create significant growth in demand for maternal and infant products, such as disposable diapers, according to industry experts.

Child-related consumption will be greatly increased, said Zhang Yuanmeng, director of the China Research Center for Children's Industry. But the timing and degree of the impact will vary by industry, with those related to pregnancy, birth and the neonatal period seeing the most direct benefit, she said.

The demand for fast-moving consumer goods in this segment, including milk powder, paper diapers, baby food and education, will increase faster than demand for durable items, Zhang said.