China & Their New Two-Children Policy

Followed by the closing of the senior Communist-party in Beijing on October 29th 2015, a very important policy has caught the attention of the whole nation. China has decided to abandon the one-child policy, allowing couples to have two children due to the issue of the aging population. The country will uphold the basic national…

Sandra Sichaofang Avatar

Followed by the closing of the senior Communist-party in Beijing on October 29th 2015, a very important policy has caught the attention of the whole nation. China has decided to abandon the one-child policy, allowing couples to have two children due to the issue of the aging population. The country will uphold the basic national policy of population control and continue to improve its strategy on population development, and implement the two children policy in order to deal with an aging population.

This new policy will not only influence the fate of hundreds of millions of families, but it has also made a profound implication on the stock market recently. There are usually three different ways to analyze the stock market: technical analysis, evolutionary analysis, and fundamental analysis. The latter will simply be used because it takes the factor, which in the future could affect the stock market, into consideration. It has been estimated that, after the implement of the two-child policy, the population will grow by approximately 3 million every year. In China, the average expenses of raising a child is 700.000 RMB (approximately 900.000 Swedish Krona), see the table below.

Let us do a simple calculation as follows (1 RMB = approx. 0.154754 U.S. dollars):

Total expenses on extra 3 million new infants:
700.000 * 3million = 2.100.000million RMB

Total school fee on extra 3 million new infants:
100.000 * 3million = 300.000million RMB

Total money flowing into the market:
2.100.000 – 300.000 = 1.800.000million RMB

It means that there will be an increase in consumption with 1.800.000million RMB per year because of the two-child policy. As has been listed on the table, the money will mostly flow into several baby-related branches and bring huge profits to the companies. Examples of these are medicine, milk powder, toys, private education, children’s apparel companies. Thus, the related stock will surge due to the expected outstanding performance of those companies.

The candlestick charts above, significantly shows that the stock of milk powder company, Xinjiang Yilite Industry Co. Ltd, and the stock of baby-related commodity, Weixing Shihua surged at the end of October. More precisely, these two stocks have jumped 4.18 %( Xinjiang Yilite Industry Co., Ltd) and 9.3 %( Zhejiang Weixing Shihua Co.,Ltd).

However, even though it is highly expected that the stocks are valuable for investing, it is still suggested that investors should pay attention to the companies’ stocks in the long run, especially after the release of the real data on baby boom, and make a wise investment.

About Nådiga Lundtan

Founded in 1948 and has since been an important part of student life in the economics program at Lund University. Nådiga Lundtan covers a wide range of topics related to economics, society, and politics, as well as careers, entrepreneurship, and innovation. It is a platform for students to share their ideas and opinions on economics and related fields.

View more articles
  • The beauty of shared madness – My experience queuing for Kvalborg tickets

    And thus it began. The season of the perhaps highest highs and the lowest lows of the student life season. Students are sat with their backs to the sun-warm stone wall of Lund Cathedral, iced coffee in hand. Exams are piling up and hours under the light of green lamps in the library are long.…

  • Tenta-licious: When time is worth its weight in food!

    A week before my first “tentaperiod” of the year, I realized that I no longer had time to prep my lunches. Instead, I decided to rate some of the lunch options in close proximity to the school. My criteria were that a lunch should be cheap, filling, tasty, and quick. 5 days until the exam.…

  • What´s going on with USAID? A talk with Ellen Hillbom

    President Donald Trump’s entry into office has resulted in a massive stream of executive orders. Although Trump has been vocal about the changes he wants to implement, many of the orders, both their content and the speed by which they are being issued, have surprised both voters and opponents. Many of the most radical ones…