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As of October 29, 2015, China has abolished the one child policy that had been in place since 1979. Couples will now be allowed two children under the new policy. China originally started the policy due to “fears that an exploding population would slow economic growth.” This change in policy has huge economic implications due to the prospective increase in population in the world’s most heavily populated country. Mead Johnson Nutrition (MJN) saw its shares increase 4% on Thursday since the announcement, in part due to MJN being one of the leading sellers of baby formula in China. More children means that companies that make goods tailored towards a younger clientele will see their profits increase in China.
China had been relaxing the policy over the past few years. According to London School of Economics Professor Hyun Bang Shin, the end of the policy was inevitable and is "simply an endorsement of many changes and relaxation of policies in recent years." The reason behind this relaxation of policy has been the social instability caused by the preference of male babies over female ones. To curb this problem, the restrictions have gradually become more open to permitting more than one child per family. However, not everyone is planning to take advantage of the policy, as raising a child in China is very expensive and not everyone can afford to do so. So the change in policy may have come too late, as many people will elect not to have another child due to economic reasons.
As previously stated, the economic impacts of this policy change could be huge, as the next generation of Chinese consumers will be greater in terms of number, which may cause large companies to expand their marketing efforts in China. Regardless of how many couples elect to have an extra child, this is promising news for both social and economic reasons.
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