Boom is expected to increase sales of formula firms, diaper and toiletry makers for children.


China’s emerging baby boom, driven by more-relaxed government policies and the year of the dragon, is fertile ground for both domestic and overseas companies.

The world’s second-largest economy will experience a population boom from 2005 to 2020 and the country’s birth rate will reach its peak in 2016, the National Bureau of Statistics predicts. The Chinese population is expected to reach 1.388 billion by 2020 from 1.334 billion in 2009, according to the United Nations.

Many families are also likely to want their children born in 2012, the year of the dragon. Five percent more babies are born in a dragon year because the icon of China’s emperors symbolizes power and wealth, said Cheung Tak Hong, who runs the obstetrics and gynecology department at the Prince of Wales Hospital in Hong Kong.

“The baby boom is a good investment idea in the near term,” said Jessie Guo, Jefferies Group Inc.’s Hong Kong-based head for consumer research in Asia. “The growth is likely to sustain for the next two to three years.”

The boom is expected to increase sales of formula companies such as Inner Mongolia Yili Industrial Group Co., diaper maker Hengan International Group Co. and Prince Frog International Holdings Ltd., a maker of toiletries for children.

Investors who sold Chinese dairy companies after tainted formula killed at least six infants three years ago are buying again. 

Yili dropped 67 percent in 2008 in Shanghai trading after it was identified among 22 companies that sold products containing melamine. The stock of China’s top publicly traded baby formula maker has jumped more than fivefold since then, and 21 out of 22 analysts tracked by Bloomberg who cover the stock predict it will continue to rise. The Shanghai Composite Index has gained 33 percent since the end of 2008.

“The dragon year baby boom is almost a sure thing, which will boost the demand for infant products such as baby formula, diapers and clothes,” said Michele Mak, a consumer-sector analyst at BNP Paribas.

China introduced a one-child policy in 1979 to curb population growth and drive prosperity. Now, facing an aging labor force, the government has eased restrictions by allowing couples who are both only children to have two kids of their own. In addition, rural couples whose first child is a girl over four years old are allowed a second child.

As incomes rise, Chinese parents have more money to spend on their children. Per-capita disposable income for households in towns and cities rose 8 percent to 19,109 yuan last year, almost doubling from five years ago.

China’s baby-food market will grow about 22 percent to more than 68 billion yuan ($11 billion) in 2011 and will almost double to 136 billion yuan by 2015, researcher Euromonitor International estimates. Baby food and pediatric supplement maker Biostime International Holdings Ltd. has gained 1.3% percent in Hong Kong trading this year. (Bloomberg)