How will the accelerated implementation of the three-child policy impact the consumer industry going forward?

Population aging is a major global demographic trend and will remain a basic feature of China's national condition for a considerable period of time. On June 18, the State Council executive meeting passed the 'Draft Amendment to the Population and Family Planning Law of the People’s Republic of China,' allowing couples to have three children. In the long term, this policy is beneficial in alleviating the decline in birth rates, improving the age structure of the population, and promoting balanced long-term population development.

According to data from the seventh national census conducted by the National Bureau of Statistics, about 40% of births in recent years were second children, which is not a low proportion. This means that the main factor dragging down China's birth rate stems from the rapid decline in first-child birth rates. Even with a high percentage of second-child births, it has still been unable to reverse the overall declining trend in birth rates. From this perspective, relying solely on the three-child policy to fundamentally reverse the current issue of a low overall birth rate may present some challenges.

From an investment standpoint, stocks related to the three-child policy may not necessarily receive substantial earnings support from a significant rise in birth rates. Although stocks related to birth rates saw noticeable gains or rebounds on the day the policy news was announced—such as those tied to infant formula within the consumer sector—we believe investors can remain relatively calm in the short term.

We fully support the introduction of the three-child policy to improve the population structure. However, as an investment theme, lifting restrictions on having three children is only the first step. More supporting policies are needed. We believe investors can wait for further policies and make investment decisions after the situation becomes clearer.

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