HONG KONG — The announcement that China will abolish its one-child policy, allowing parents up to two children, has already sparked an investor frenzy in baby-related businesses in China. But while there is bound to be an increase in spending as parents are given more leeway to expand their families, how much and when is a murkier matter.
First on timing: The announcement came out Thursday but the proposal must be passed by the country’s top legislature, which isn’t meeting again until March.
Brands can attempt to get a head start in the market and follow in the footsteps of Dior and Ralph Lauren, which have already launched their kids’ lines in China and “are doing really well,” said Joyce Ling, vice president of strategy for Razorfish China.
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But Ling cautioned that while spending on infant and child products may ramp up, it may be at the cost of other leisure spending.
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“The parents are still making the same amount of money but you have to buy food, diapers, all the caring stuff. The parents will now struggle a little more on personal leisure expense and shift their household budget to pay for the child,” she said.
Many Chinese couples, in fact, view having a second child as cost-prohibitive or downright burdensome.
“There’s an element of being allowed and wanting to,” said Ken Grant of China luxury consultancy FDKG Insights. “Being allowed means you’re not going to get fined or won’t get into trouble for want of a better description. But for most families, it’s culturally normal to have that one child.”
A relaxation in the family planning policy in 2013, which allowed parents who are only kids to have up to two children in certain areas, led to a similar surge of interest in baby-related businesses. But government statistics a year later showed that it had vastly overestimated demand. China’s National Health and Family Planning Commission estimated the move would boost the population by two million births in a year, but saw just over 800,000 second-child applications ten months after the announcement.
Nomura analyst Yang Zhao said the latest two-child policy is unlikely to significantly help the rapidly aging population. Incentives like raising maternity allowances instead would be more effective in encouraging childbearing.
But for those who do have the resources to expand their family, a second child could act as a prestige enhancer.
“It’s not uncommon to see people with two children in Shanghai,” Grant said. “You could pay fines…It’s impossible to prove that, but you will find that parents that will use that as a way to show status or one-upmanship.”
Grant also said that it’s unlikely any new children resulting from China’s new policy will be wearing hand-me-down clothing. “They won’t put their child in secondhand clothes because having their kids in new stuff is quite important. It’s a way to show your affluence, that you’re capable of doing those things,” he said.
“I don’t think you’ll see anything significant initially because it takes a while to permeate through culture. They might perceive it as being twice as expensive or twice as complicated. It will take a while to go through the system,” he added.