China Scrapping One-Child Policy will Not Bring Sweeping Change to Baby Food Demand, Opine Experts

Even the slightest increase in demand from China, the world’s most populated country, can rally virtually any commodity’s price. It is thus hardly surprising that baby food makers’ stocks spiked after it was officially announced that couples in China can now have more than one child. For decades, the Communist Party in China had imposed a one-child policy on couples in a bid to bring the country’s unbridled population growth under control. Danone SA shares, for instance, reported a five-month high while the shares of Mead Johnson Nutrition Co spiked to the highest level in two months.

The baby food industry is in desperate need of a boost after sales were hit by the Chinese government promoting breastfeeding and recent baby formula controversies still being fresh in consumers’ minds.

However, market watchers are now saying that the surge in food company stocks might be unfounded. Firstly, a baby boom in the Chinese market might not really occur because having more than one child is expensive for many families. And with the stringent enforcement of the one-child policy, the small-family culture has become an integral part of contemporary Chinese culture.

Surprisingly, it is not just market analysts, but companies themselves that are not too bullish about the expected results of the one-child policy being scrapped. For instance, one of the largest international baby food brands that has a presence in China feels that the birth rates will only be incrementally impacted by the new policy changes in China, as reported by Reuters. Many industry players are of the opinion that the impact of this policy relaxation will in fact, be far less powerful that previous policy relaxations.

Currently, New Zealand leads in dairy exports to China. The US Department of Agriculture said that the former’s whole milk powder shipments to China slid by about 65% from January to May 2015.

While there is no denying that the policy change will indeed be good for baby food demand in the long run, the change will not be as sweeping as expected.

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