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Current as of 19/12/14 01:40PM NZST

Christopher Adams

The Business Herald’s markets and banking reporter.

Two-child China a boon for baby milk

Infant formula makers expect the $15 billion Chinese market to double by 2017, even without the effects of a relaxation of the one-child policy. Photo / Christopher Adams
Infant formula makers expect the $15 billion Chinese market to double by 2017, even without the effects of a relaxation of the one-child policy. Photo / Christopher Adams

The loosening of China's one-child policy is expected to provide a boost for New Zealand infant formula exporters, many of whom are still being hit by the residual impact of Fonterra's botulism botch-up.

The country's Communist Party has announced Chinese couples will be allowed to have two children if one of the parents is an only child.

At present, both parents must be only children in order to be exempt from the one-child rule.

The change will allow millions of Chinese parents to have a second child, and the announcement prompted share price gains for companies with baby-related products.

Shares in Hong Kong-listed Yashili, the Chinese dairy firm establishing an infant formula firm south of Auckland, rose almost 10 per cent on the news.

Gregg Wycherley, managing director of Auckland's Fresco Nutrition, which is preparing to launch its goat-milk infant formula in China, said he hoped the policy change - combined with 2014 being the auspicious year of the horse - would result in a spike in the Chinese birth rate.

"From a business point of view it could only be helpful for New Zealand infant formula manufacturers," Wycherley said.

Chairman of the New Zealand Infant Formula Exporters Association, Michael Barnett, said the prospect of China's infant formula market becoming even bigger was good news.

The US$12.4 billion ($15.13 billion) Chinese infant formula market is expected to double in size by 2017, according to Euromonitor data compiled before the policy change.

The August botulism false alarm spooked many Chinese consumers, but Barnett said there had been some recent improvements in the trading conditions facing Kiwi baby formula firms. However, there would be "one or two casualties" stemming from the contamination debacle by the end of this year.

The one-child policy applies to only about a third of China's population, with ethnic minorities exempt and rural Chinese already allowed a second child.

China's Government claims the country's population - around 1.3 billion - would be 400 million higher if the policy had not been introduced in 1979.

Many Western experts have disputed that calculation, saying the actual figure is likely to be closer to 100 million.

- NZ Herald

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