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: China lifts 2-child policy to 3, as demographic crisis looms

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In the face of a looming demographic crisis from an aging population and falling birthrates, China announced on Monday that married couples may now have three children, up from two. The decision — made at the highest levels of Chinese politics — includes new supports for education and child-rearing.

  • The world’s most populous country scrapped its 1980 one-child policy more than five years ago, allowing couples to have two children. But the bid to increase the number of births appears to have stalled, and the results of China’s 2020 census last month showed that birthrates fell for the fourth straight year.
  • The new three-child policy came after a meeting of the Politburo, the top body of the Chinese Communist Party, chaired by President Xi Jinping. China experts say that decisions of this magnitude are usually the product of larger party conferences, so Monday’s move signals concern at the highest levels.
  • Shares in fertility companies, milk-formula producers, and toy makers initially soared in Shanghai and Hong Kong on the news, but many of the Hong Kong stocks pared gains on Tuesday. Analysts at Jefferies see China’s new policy as a near-term positive for London-listed consumer-goods giant Reckitt
    RKT,
    +0.60%

    RBGLY,
    +0.52%

    and French food-products group Danone
    BN,
    -0.14%

    DANOY,
    -0.13%
    .

Read: People’s Bank of China fights to keep yuan from surging

The outlook: Can the Chinese government effectively encourage people to have more babies? Falling birthrates are a global phenomenon, and China also faces a declining population of women of peak childbearing age. It may take more than a green light and new supports from the government. Fewer babies and an aging population remain macro risks for sectors including Chinese pensions and healthcare.

Read: China announces ‘zero tolerance’ crackdown on commodity-market speculators

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