Family entertainment giant Disney on Friday welcomed Beijing’s scrapping of the one-child policy as investors bumped up Chinese “baby concept” stocks, but analysts warned the benefits to companies might be limited.
China announced the end of its controversial family planning policy at the close of a meeting of the ruling Communist Party on Thursday, with a communique saying all couples will be allowed two children.
On a visit to China, Walt Disney chief Robert Iger said the change was “good timing” for the US company as it prepares to open a theme park in the commercial hub Shanghai.
“It was good timing… Obviously kids are good for Disney,” Iger told a conference in Shanghai, to audience laughter.
The Walt Disney Co. and Chinese partner Shanghai Shendi Group broke ground on the $5.5 billion park in April 2011. The opening was originally planned for this year, and was later pushed back to 2016.
But Disney, whose businesses range from movies to merchandise, believes the world’s most populous nation has strong potential regardless of the family planning rules, Iger said.
“China is a good market, policy change or not,” he said. “Yes, we love kids of course, but we love everybody.”
Other beneficiaries include global dairy-related companies such as France’s Danone and Mead Johnson Nutrition of the United States, whose stock prices rose on Thursday after the policy change was announced.
A series of food safety scandals in China, including one in 2008 when several infants died and thousands fell ill because of poisoned milk, has driven demand for foreign infant formula brands.
The relaxation of the policy comes as China’s working age population is shrinking and social tensions are on the rise, and the policy has created a significant gender imbalance given a traditional preference for boys.
“The relaxation will likely lead to a higher birth rate in China,” UBS Securities Asia said in a research report, but added that the extent of the rise was “uncertain as birth rates in its East Asian neighbours are also very low”.
“Short-term benefits of the policy relaxation will be limited, as demographic shifts tend to be very long term,” it added.
– More babies, more business –
Some urban Chinese couples cite the cost of raising a child as a disincentive to having more than one.
But entrepreneur Liang Yan, who runs her own store Little Angel selling baby milk powder and clothing in the northern province of Shanxi, welcomed the change — especially given slowing growth which has forced her to shut two other shops.
“More babies means higher demand and more customers,” she told AFP. “Who knows what people think of the policy. But after a couple of years, our sales should be able to jump.”
Stock investors also cheered the news, pushing up listed Chinese companies which offer products for children.
Beingmate Baby and Child Food surged by its 10 percent daily limit on the Shenzhen market on Friday, despite previously reporting a first-half net loss of more than 100 million yuan ($16 million).
Shenzhen-listed Nappy provider C&S Paper also surged 10 percent in Shenzhen while Guangdong Alpha Animation and Culture, which produces animation and toys for children, jumped 7.87 percent.
In Shanghai, milk producer Bright Dairy and Food gained 4.12 percent.
But one analyst warned the gains might be short-lived.
“The market has speculated on the baby concept for years, but how this policy (change) will actually affect companies is still unclear,” Zhang Qi, an analyst from Haitong Securities, told AFP.
“The easing of the one child policy might not have such a big effect on the birth rate as it’s difficult to reverse the current population structure,” he said.