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What Does China’s Two-Child Policy Mean For Business In The Future?

China has finally announced plan to update its one-child policy that was introduced since the late 1970’s. Chinese family would soon be allowed to have 2 children instead of one. According to a forecast by Credit Suisse, the relaxation of the policy might increase about 1.2 million new babies next year (2016) and up to 7 million new births by the end of the decade.

With the rise of China and the wealth of the Chinese, what does all these means for business in the future?

Higher consumption

The increase in population in the future might lead to greater consumption in China. Higher consumption can be in all area of products and services. In particular, necessities such as cooking oil, milk and public transportation might be in higher demand. And these might not only affect companies in China. Many companies listed here such as Wilmar International Limited (SGX: F34) and Comfortdelgro Corporation Ltd (SGX: C52) distributes cooking oil and provide transportation services in China respectively.

Higher tourism

As more Chinese gain wealth, the desire to travel will increase as well. Singapore being one of the world’s most popular tourist destinations is set to benefit from this trend. Hospitality trusts such as CDL Hospitality Trusts (SGX: J85) or Ascott Residence Trust (SGX: A68U) might be well positioned to benefit in the long term, given their large network of hospitality assets around the world.

Not to forget the service providers such as Singapore Airlines Ltd (SGX: C6L) which might see increasing demand for its services as more and more people want to travel. However, given the low operation margins experienced by the airline industry, a proxy to get exposure to the increase in air travel demand might be investing into SATS Ltd (SGX: S58) instead.

Foolish Summary

It is important to note that such demands will not be coming overnight. Yet for long term investors, there is no reason not to look 20 to 30 years down the road and see how the world will change in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Wilmar International.