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New policy generates baby biz buzz

China’s decision to scrap its decades-old family planning policy is expected to lead to a higher birthrate in the coming years. It may also open up more business opportunities in the baby market.

Newly-released two-child policy will allow all couples across the country to have two children, ending the one-child policy that has been in place since the late 1970s. Lv Guizhu, a retired worker, now spends much of her time taking care of her grandson. The long-waited policy change excited her family at first, but they’re worried about the costs of a second child.

“My son was thinking about having a second child just after the policy was issued. But they are working full time. If things get better, then they would have another child, but not for now. Raising a child costs a lot, at least 20,000 to 30,000 before kindergarten. And then it will cost more for education,” Customer Lyn Guizhu said.

The Chinese Academy of Social Sciences says that the average annual cost of raising a child in China can reach 16,000 yuan ($2,520). It also estimates that the new policy means at least 2 million newborns are expected each year. To people in the baby business that raises prospects of a booming baby market worth hundreds of billions of yuan. Lucy Wang, a sales person from Mothercare, says they have sold 40 percent more children’s clothing in the past few months compared to the previous year. She says that’s because Shanghai relaxed its birth controls last year, allowing a second child to couples if either spouse is an only child.

“After the new policy, many moms began considering having a second child in the long run. So products like toys and clothing, which can be used by the newborn and also last for use again later are now popular. We see an increasing demand for those,” Sales Lucy Wang with Mothercare said.

Eva Na, vice-president of consulting firm Nielsen also sees bright prospects for rising business opportunities in all categories related to baby-raising. She predicts that education, baby formula, diapers, clothes, and toys will be key areas for rapid development of domestic consumption.

“Nowadays, a lot of parents, particularly mommy would be working; infant formula would provide the convenience for them to feed the baby as well as baby food. And also because it is their second child, there might be an increasing need for baby-related service like early child care, education, or any service, that helps them to raise the child better, in pursuit for the quality or high standard for the babies,” Eva Na, president of Nielsen China, said.

Analysts say, however, the implications if the policy relaxation are not expected within a short time. Some estimates say only ten percent of parents affected by the new policy intend to take advantage of it. In the past few years, the child care industry has seen double digits growth. Last year, the baby products market hit a value of over 100 billion yuan, up 17% compared to the previous year and much higher than the average growth in the fast moving consumer goods market.