How China’s Child Policy Could Have Helped the U.S.

In recent research, Goldman Sachs suggested that U.S. dairy stocks will benefit from China’s new baby boosting policies.

Not necessarily.

China’s Child Policies

During the 1970s, China moved from a “late marriage, longer spacing, and fewer children” campaign to a one-child policy. Implemented locally, the law, community institutions, sterilization, abortion, and infanticide fueled one-child. Especially in the city, couples with more than one child could have lost a job, 10 to 20 percent of their pay, and even 40 percent of a year’s wages.

It took more than three decades for China’s leadership to decide that the tradeoffs were too costly. They had too many boys and insufficient support for an aging population. Consequently, in 2013, the government said two children were permitted if one parent was an only child. Then, two years later, all couples were allowed to have two children. By 2023, they said three (and more) were okay.

But it did not quite work out as they had hoped:

Now, with population down and births minimally up, the National People’s Congress and the Chinese People’s Political Consultative Conference announced a proactive plan.

They were responding to these numbers:

Perhaps reflecting what the country will do, China’s inner Mongolian capital, Hohhot, said it would offer a one-time payment for the first child, and then annual payments up to age five for the second child, and even more for a third offspring. In addition, they will give new parents a year’s milk subsidy.

This is where international trade enters the picture.

Goldman expected a lift for companies whose products include infant formula, milk powder, and liquid milk:

And this is where I have a question.

Our Bottom Line: Reciprocal Tariffs

It’s not quite so easy anymore to predict how trade will unfold. Instead of being spurred by normal incentives, markets have absorbed the Trump trade war. On Wednesday, with the U.S. slapping an additional 34% tariff on all Chinese imports, China responded with its own 34% tariff on U.S. goods.

My sources and more: This Goldman Sachs research note and a past econlife helped to explain the impact of China’s child policy,  Then, for statistics, Worldometer  and CNN had the newest numbers. Meanwhile, the International Dairy Foods Association named Mexico, Canada, and China as major trading partners for the dairy exports that fueled the industry.

Please note that several of today’s sentences were in a past econlife post.