The expected boost to baby-related stocks from the easing of China's one-child policy have yet to materialize, as the high cost of living still deters households from growing their families, reported Bloomberg.

Investors bet that companies that trade in baby products would benefit from the Communist Party's relaxation of its one-child policy last November. Such expectations powered milk-powder producers Biostime International Holdings, Ltd. and Yashili International Holdings, Ltd. to all-time highs after the announcement, but their stock prices have retreated by 40 percent this year. Diaper maker Hengan International Group Co., meanwhile, has dropped 8.4 percent even as the MSCI gauge rose 5.5 percent, Bloomberg said.

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Analyst interviewed by Bloomberg, however, said the retreat of the stock prices of the said companies were expected since there was too much speculation about a baby boom that will not happen immediately.

According to the United Nations, China's population is set to shrink starting in 2030 unless it can reverse its low birth rates, which have far reaching consequences that go beyond companies selling products for babies. 

Bocom International Holdings, Co. told Bloomberg that unless China successfully convinces its citizens to have more babies, the country will face faster inflation and slower productivity growth. China is already experiencing rising labor costs due to the scarcity of workers that have forced made companies such as Samsung Electronics Co. relocate in other countries

So far, there have been few takers to the government's offer allowing couples to have another child. Of the 11 million Chinese couples eligible,  only 3 percent applied for permission according to Bloomberg.

Bloomberg reported that the cost of raising another child in a slowing economy slowing was a big factor in the low number of applications for permits. It cited a Credit Suisse Group AG study that showed raising a child from birth through to 18 years costs about 23,000 yuan ($3,745) a year, nearly half of the average household income in China.

To send a child to college in Beijing, couples would need to spend 2.76 million yuan, according to China's official Xinhua News Agency in July 2013. The report added a dire warning to average per-capita income earners: to afford this, they would need to theoretically work for 23 years without eating. 

China's fertility rate of 1.66 per woman is below that 2.1 level needed to sustain population levels, according to the UN.

Bloomber said China's latest census in 2010 shows 178 million Chinese were over 60. That figure may rise to 437 million by 2050 as the population falls to 1.38 billion from a peak of 1.45 billion in 2030, according to UN forecast.

TagsOne Child Policy