In 2015, China decided to scrap its decades-old one-child policy to allow families of two.
Last year, fearing a demographic crisis, the government raised that to three.
The trouble is, Chinese couples have not been playing the game.
Data out this week showed China's birth rate plummeted for a fifth consecutive year, hitting a record low in 2021.
The People's Republic recorded 10.62 million births in the year - just 7.5 births per 1000 people and 1.4 million fewer than last year - according the National Bureau of Statistics.
The number of births was just enough to outnumber deaths, with the population growing by 480,000.
Demographers have warned that if the downward trend continues, China's population could soon shrink.
The bureau said the decline in births stemmed from a combination of factors, from a decrease in the number of women of childbearing age, a continued decline in fertility, changes in attitudes towards childbearing and young people putting off marriage.
China's declining birth rate is not news to New Zealand's $1.85 billion infant formula export industry, but this week's numbers nevertheless came as a shock.
Birth rate headwind
The birth rate counts as another headwind for what, until recently, had been a happy hunting ground for foreign producers of formula, who have benefited from the 2008 melamine scandal, which devastated local consumers' confidence in China-made product.
Now it seems that China's infant formula market - the biggest in the world - is not the blue sky opportunity it once was.
"The birth rate is definitely falling and you could argue that at the time China was considering changing its one-child policy, it took 10 years too long to do it," says Beijing-based David Mahon, executive chair of Mahon China Investment Management.
The one-child policy had been introduced in 1980 to try to curb the country's huge population, which now stands at 1.4 billion.
"No one wanted to make a decision because it had become such a seminal part of how the government was arranging society, and there were a million people involved in policing it," Mahon told the Herald.
"That was one factor - a period of overdoing the one-child policy.
"The other thing is of course the cost of living in the cities and those factors are considerable - to bring up a child and educate them is very expensive.
"Then there is the space - apartments are very small.
"The idea of a family of more than one, for a culture that has and a one-child policy for decades, is daunting.
"This was a factor that was always going to influence infant formula consumption and it is already beginning to account for part of the fall in imported infant formula product coming into China."
Covid-19 drives change
Mahon says the decline in imported formula sales in China has also been accelerated by Covid-19.
"In 2020 consumers with new babies faced uncertain supply because so much was coming in cross-border, though daigou, and so they switched to local brands to be confident that they could continue to deliver the same formula to their child without changing brands, and that is what really what accelerated things."
Latest customs data showed that in the fist seven months of 2021, Chinese domestic imports of infant formula reached 14.57 million tonnes, down 25 per cent year-on-year.
During this period the big domestic competitors, Feihe and Junlebao, had dramatically beefed up their marketing efforts.
"They went into the coast cities - into the middle class market that had been so dominated by the foreign brands - so there was quite a sea change.
"It's a challenge for the infant formula brands - for New Zealand."
Mahon says Fonterra's move to sell its dairy farms in China and to focus back on the core of the business - ingredients - has proven to be the right call.
The New Zealand dairy giant sells its own formula, Anmum and Anlene, in China, but more importantly it supplies whole milk powder, whey powder, and specialty powders for China's increasingly robust domestic formula manufacturing sector.
"In the end it's just like any other commodity, but I think the dynamics of China have been different," Mahon says.
"We are now in a post-melamine era and I think the growth is now going to be in Feihe and Junlebao."
Mahon says that while the birth rate is falling, the demographic change of a growing middle class remains intact - not just in scale but also in wealth.
"So on that basis if you are a well-placed brand like a2 Milk, the family with the means to have an imported infant formula is still going to do so," Mahon says.
Memories of the melamine scandal - which saw some babies die and thousands being hospitalised after consuming contaminated formula - persist for the older generation.
"Many grandparents looking after children remember the melamine crisis - as long is pricing is reasonable they will buy overseas brands or they will buy overseas brands that are establishing themselves to produce here, because of the trust factor.
"If you are a good niche product with a differentiated brand, and you are both in China and selling into China, then you can manage the market here and still keep your market share."
As Mahon sees it, the resurgence of the domestic brands is not just about economic nationalism.
"Yes, there is a bit of pride here now and Chinese people do like to buy local if they can, but in the end they are very savvy consumers and they want value for money."
He says some of the foreign players have a history of charging inflated prices for their product in China, relative to the price paid in their home countries.
"The greed of many them is now coming to bite them."
Jan Carey, chief executive of the Infant Nutrition Council (INC) which represents about 90 per cent by value of the producers in Australia and New Zealand, says Covid-19 has added another layer of complication for the trade.
She says New Zealand does not face the same strained geopolitical relationship that Australia has with China, but loss of the once-popular daigou trade - which typically involves New Zealand-made product bought off Australian shelves for grey market re-export to China - has hit many of the INC's members hard.
Simon Woolmer, the INC's Melbourne-based trade and market access manager, says the decline in China's birth rate is not a new trend "but the 2021 figures are quite startling and significantly worse than we thought".
"It's concerning. There are a couple of ways to look at it. It has been a longer term trend; there is a question as to whether the recent figure are Covid-influenced and maybe a hiccup."
The New Zealand and Australian infant formula export business face a number of challenges.
The first is the Covid-driven decimation of the daigou trade, which has been an important plank for the formula makers, particularly a2 Milk, in establishing a presence in the Chinese market.
Woolmer says big shifts in the Chinese infant formula market have already made their presence felt in no uncertain terms.
A2 Milk's June 2021 year result was hit by unprecedented levels of uncertainty and volatility due to Covid and the rapidly changing China infant nutrition market.
Changes in the China dynamic had a profound impact on a2 Milk's results, with its net profit dropping 79.1 per cent to $80.7m.
And a2 Milk's formula supplier, Synlait, saw its formula sales drop by 35 per cent in the July year, taking the company $28.5m into the red.
The profitability of the other formula companies with exposure to China - particularly those exposed to daigou - has also been hit hard.
Woolmer says there is sense now that the daigou trade will not recover.
"The small daigou traders are probably gone forever in the infant formula space because of the regulatory hurdles they now have go to through.
"Then there is the growth in popularity of the Chinese domestic brands.
"The melamine scare is now a distant memory and the brands in China are making inroads back into the middle class - which has traditionally been New Zealand's and Australia's customer base - all when you've got Covid stuff on top of that where the supply chains and freight costs start working against us as well.
"It's a perfect storm at the moment, and then there is obviously the birth rate on top of that," he says. "It's a concern."
Nevertheless, China would remain a hugely important market.
"Our sense is that China will continue to be the biggest market for New Zealand infant formula exporters, no matter what.
"But whether that trade will need to be supplemented with newer markets - that's an issue for our members."
China has made no secret of the fact that it wants to nurture the market back from the melamine taint to 60 per cent domestic and 40 per cent imported.
"We think that they have probably already reached that figure - and that they will probably push for more."
Before Covid, New Zealand's formula exports to China were worth about $750m and New Zealand was in the top three infant formula suppliers.
Overall, infant formula imports into China have fallen from US$2.5 billion in 2020 to US$2.1b in 2021.
The INC represents the big guns - brands from a2 Milk and Danone, through to the contract manufacturers and ingredients suppliers further down the chain.
Woolmer expects INC's members to try to lessen their reliance on China.
For the council's Australian members, there was a case for diversification given the geopolitical tensions, but less so for its New Zealand members, due to this country's less fraught relationship with the world's most populous nation.
"Members are looking at other regional markets such as Vietnam, South Korea and Thailand - all good growth markets but clearly much smaller than China."
Woolmer says China is a much more competitive market now.
"There is clearly a big push - Chinese products for Chinese babies - and some of these domestic brands are good products.
Doom and gloom?
"It's not all doom and gloom. The industry is doing very well and the New Zealand brands are very strong in China and there is no reason to think that they will not continue that way.
"But I think the almost myopic focus on China will need to broaden over the next five to 10 years."