New 'two-child' rules won't trigger China baby boom
With disposable incomes just above the running costs of a middle-class urban infant, eligible couples will be deterred from enlarging families
Among the reforms pledged by China's Communist Party at its bunfight last month was a relaxation of the one-child policy.
Rule changes will be implemented at the local level, so the timing and actual extent of the liberalisation remains unclear. But the idea is that in future couples will be allowed to have a second baby if either parent is themselves a single child.
The change is not as revolutionary as it first sounds. For years now, rural families have been allowed to have a second child if the first was a girl. So have urban couples if both come from one-child families.
Even so, investors are elatedly forecasting a baby boom. Since August, when state media reported that an easing of the policy was likely, Hong Kong-listed stocks in mainland manufacturers of baby products have surged.
For example, shares in pram-maker Goodbaby have climbed 40 per cent. Meanwhile, baby food company Biostime has shot up 78 per cent, putting the stock at an eye-popping valuation of 40 times last year's earnings (see the first chart).
Despite all the excitement, however, the likely impact of the policy relaxation on birth rates, and on household spending, remains uncertain.
Clint Laurent, the founder of specialist research firm Global Demographics, calculates that if the new rules are fully implemented from next year, about two million couples will qualify to have a second child next year. On top of that, an additional four million couples will have pre-qualified in earlier years to have a second child under the new regulations.
Not all of those will rush to have children at once, of course. Even so, Laurent estimates that the rule change could see an extra 2.7 million babies born next year, rising to an extra 3.8 million in 2017 before the boom in birth begins to abate.
That would push the number of babies born each year up from about 14 million to 17 million, resulting in more than 22 million extra births by the end of 2020 (see the second chart).
However, others believe Laurent's projections overstate the probable impact of the new two-child regulation.
Economist Tao Dong and his colleagues at investment bank Credit Suisse point out that despite the policy relaxation, qualifying to have a second child under the new rules could still be extremely laborious.
They cite the example of Nanjing, where rules allowing second children were introduced in 2000. However, parents wanting to take advantage of the dispensation are required to provide the authorities with their household registration book, proof of their employment, their marriage and birth certificates, the marriage and birth certificates of their own parents, their first child's birth certificate, and documents verifying that they are themselves single children.
Altogether, they must collect more than 30 stamps and 50 official letters before their application can be approved; a lengthy process, and a costly one if the officials concerned require a little extra monetary stimulus to get things done.
As a result, although in 2009 more than 10,000 Nanjing couples qualified to have a second child, only 100 extra babies were actually born.
Official obstruction isn't the only deterrent. Having children is an expensive business, with Credit Suisse estimating the running costs of a middle-class urban infant at more than 20,000 yuan (HK$25,500) a year.
In a country where disposable household income in even the richest cities averages no more than 30,000 yuan a year, that will make having a second child a prohibitively expensive prospect for most eligible couples.
In consequence, Tao and his team expect fewer than 500,000 more babies next year, adding a mere 0.08 per cent to consumer spending, with just eight million extra births by 2020.
The anticipated baby boom may turn out to be more of a "phut".