After the Plenum, sell pianos and dairy; The easing of the one-child policy has put the pocketbook in focus

November 26, 2013 4:48 pm

After the Plenum, sell pianos and dairy

By Patti Waldmeir in Shanghai

The easing of the one-child policy has put the pocketbook in focus, writes Patti Waldmeir

China relaxed its so-called one-child policy this month, and everything from online opinion polls to piano stocks jumped for joy. The theory seemed to be that the only thing keeping Chinese couples from breeding more piano players was Communist party policy. Of course, even in planned economies things are rarely so simple – especially when sex, money and tiger mums are involved. The policy change will allow couples to bear a second child if one of them is an only child; previously they both had to be singletons. It’s probably safe to assume that many of the babies born as a result will learn to play the piano. What’s riskier is assuming that there will be a baby boom in the first place.Symbolically, emotionally and possibly politically, the policy change is a big deal. For most people most of the time, the party stays out of their private lives – except when it comes to procreation. The further Nanny steps away from the nursery, the more popular she will be.

But don’t go long on piano stocks just yet: nearly two-thirds of the population is already allowed to have two or more children under the exception-riddled one-child policy; the official news agency Xinhua says only 37.5 per cent of the populace came under the one-child shackle, even before the recent change.

So the party was previously already allowing plenty of people to breed doubles. But many declined, because procreation – in China as elsewhere – is often determined less by policy than by the pocketbook.

Online opinion polls published since the change have routinely shown that 50, 60 or even 70 per cent of respondents say they want to have two children. In one such poll, 90 per cent of respondents over the age of 46 said they wanted two. This either means it’s time to go long on fertility clinic stocks – or that people are more willing to have a second child online than in reality.

In Shanghai, more than 80 per cent of the child-bearing population was already allowed to have a second child under the old policy, says demographer He Yafu. But the city’s birth rate is under one – which means many couples are unwilling to have any kids at all, let alone a pair.

But it seems other cities share Shanghai’s unwillingness – or inability – to deliver a second child. Beijing family planning commission figures for 2010 show that 93 per cent of total births in that year were first children and, as of the latest census, the birth rate in Beijing was about the same as in Shanghai.

Demographer He points out that China is not the only country where people deliver fewer babies than they say they will – sometimes infertility means they cannot. Japan’s “fertility intention” is 2.0, he says, but actual fertility is only 1.3.

Of course, some couples in China do want two or more children – and over the years, plenty have managed to have them, whatever the rule book said. Again, it’s often a pocketbook issue: in some areas, fines for excess births are up to three times’ annual income – but in others, child number two costs less than an iPhone.

Zhang Yimou, China’s most famous film-maker, has seven of them (kids, not iPhones), and could owe as much as Rmb160m in fines. But population planners in charge of enforcing the fine said last week that they couldn’t find him to extract it. Big Brother must have been off work that day. Or maybe he was too busy forcing poor mothers toabort their late-term foetuses, as still happens to some not married to famous filmmakers.

But whether the change portends a giant leap for reproductive freedom, or just a small step towards boosting a critically low urban birth rate, almost everyone is delighted – including grandparents happy to get another crack at reviving bloodlines that will otherwise die out. About half of those who voted for a second child in the Shanghai Daily poll did so for dynastic reasons, or so that the second child could help look after them in their dotage.

Once they do the maths, though, many couples think otherwise: some urban families spend up to half their monthly income importing safe formula for their newborn. Buying a flat in a serviced retirement home would surely be cheaper than raising a child from infancy, complete with keyboards. So short pianos and dairy, go long on elderly care. China is likely to have a grandparent boom long before it has a baby bulge.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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