The Chinese Government this week ended the 35-year-old one-child policy that has been blamed for skewing the gender balance, forcing women into unwanted abortions and creating a rapidly ageing workforce. Married couples will now be allowed to have two children.
The news was enough to cause a rise in the value of the New Zealand dollar, from US66.76c to US67.10c, in overnight trading.
Michael Barnett, chairman of the Infant Formula Exporters’ Association, said China was coming to terms with the problem faced by many Western countries – a higher proportion of the population reaching old age, relative to the younger demographic.
Barnett said with 65,000 babies born in China every day, any potential increase in that number resulting from the changed policy could have big ramifications for the industry.
«The removal of the one-child policy is obviously going to mean a jump in that number, which means a jump in opportunity for product going into China.
«It can be viewed as a positive thing,» he said. «It will change the fabric of China – the opportunity of having family.
«There is huge potential, but I guess my only concern is that much of the supply chain running from New Zealand into China has been taken over by the Chinese over the past couple of years,» he said. «There has been a significant change in the ownership model.»
The Fonterra whey protein scare of 2013 led to China instigating an exporter accreditation process, which in turn led to Chinese companies either taking a stake in, or taking over, small to medium sized New Zealand formula exporters. «The benefit to New Zealand is going to be there, but it is going to be limited,» Barnett said.
ANZ Bank senior economist Sharon Zollner said the move would be supportive for the New Zealand industry, but only «at the margin».
The decision was the most significant easing of strict population policies that were long considered among the ruling Communist Party’s most onerous intrusions into family life and had been gradually relaxed in recent years. Many rural families and some urban ones were already able to have two children.
ANZ said the change would not have a huge impact on New Zealand milk powder demand as it was primarily in the richer eastern seaboard cities that consumers could afford formula based on New Zealand powders.
«Here, the policy has been less binding – particularly after the policy was relaxed somewhat in 2013, but also because wealthier people generally want fewer children,» the bank said. «But it all helps at the margin.»
The Chinese Communist Party’s Central Committee said the decision was «to improve the balanced development of population».
The official Xinhua News Agency said the proposal must be approved by the top legislature before it is enacted, which is essentially a formality. It gave no indication of when that would happen.
The move may not spur a huge baby boom, however, partly because fertility rates are believed to be declining even without the policy’s enforcement.
Previous easings of the one-child policy have spurred fewer births than expected, and many younger Chinese see smaller families as ideal.
China, which has the world’s largest population at 1.4 billion people, introduced the one-child policy in 1979 as a temporary measure to curb a then-surging population and limit the demand for water and other resources. Soon afterwards, rural couples were allowed two children if their firstborn was a girl. Ethnic minorities are also allowed more than one child.
The decision caused dairy-related shares to rally on world markets.
Danone, Nestle and Mead Johnson are among the biggest players in China’s US$19 billion baby-formula market, which represents about a third of the industry globally.
Danone shares advanced as much as 3 per cent to €65.16, while Nestle added as much as 0.7 per cent to 76.25 Swiss francs in Zurich. Mead Johnson Nutrition rose as high as US$83.75 in New York trading, a 5 per cent gain.
The price of Fonterra’s units, which trade on the NZX, rose by 3c to $5.38.
Source: NZ Herald
