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What a Chinese Population Boom Would Mean for the Stock Market

Chinese diaper makers, health-care providers and education companies would be among the biggest winners if President Xi Jinping shifts his economic policy priority to population growth.

Xi’s economic planners may for the first time emphasize “population policies” over gross domestic product in the country’s next development blueprint, according to a person familiar with the discussions. A successful transition would boost earnings at companies including Hengan International Group Co., a diaper maker based in Fujian province, and Shanghai Pharmaceuticals Holding Co.

While investor bets on a baby boom proved too optimistic after the ruling Communist Party relaxed its one-child policy in November 2013, the first contraction in China’s working-age population in at least two decades last year is adding pressure on policy makers to take more drastic steps. Xi’s focus on the problem could lead to rule changes regarding health, pensions, social welfare and possibly lifting the caps on children some families can have, the person said.

“Health-care companies will be among the first beneficiaries of a baby boom,” said Steve Wang, the chief China economist at Reorient Financial Markets Ltd. in Hong Kong. “Chinese families spend a lot of money on children’s health and education.”

Biggest Winners

Companies that make drugs for children include Guangzhou Baiyunshan Pharmaceutical Holdings Co. and China Resources Sanjiu Medical & Pharmaceutical Co. Xueda Education Group, New Oriental Education & Technology Group and Guangdong Qtone Education Co. are among education companies targeting children and teenagers.

Consumer firms with products for children include Want Want China Holdings Ltd., Inner Mongolia Yili Industrial Group Co. and Goodbaby International Holdings Ltd.

“A bigger population should translate into higher demand,” said Bernard Aw, a strategist at IG Asia Pte. in Singapore.

While policies to promote population growth face hurdles including the growing expense of raising a child in China, they’re critical to making the nation’s long-term expansion more sustainable, said Ronald Wan, chief executive at Partners Capital International Ltd. in Hong Kong. The number of people between 15 and 64 years of age fell about 1.6 million last year, according to the National Bureau of Statistics.

“China has no time to wait on this front,” Wan said. “The population is aging very fast.”

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