The end of China’s one-child policy could bring more opportunities to education-oriented wealth management products

Written by Qinwen Wang || November 09 2015

China officially dropped its one-child policy by announcing that all married couples would be allowed to have two children. The move had an impact on markets at home and abroad. Shares in companies that make baby products such as diapers, prams and infant formula were up on the day of announcement while shares of popular contraception brand fell. This economic wave travelled as far as New Zealand where the currency of the dairy exporting country surged. The market reacts for a good reason. It is estimated that the relaxed controls would result in an extra 3 million to 6 million babies born annually in the five-year period starting in 2017.

The purpose of the policy shift is quite obvious: national planners aim to boost the fertility rate in China, to balance the future age structure and to maintain the demographic balance. However, for most of the young Chinese couples, having a second child in China is a much larger financial commitment than it used to be. The cost of raising children, particularly the cost of education, is a major barrier to have large families. The annual cost of raising a child estimated at 40,000 yuan on average, not to mention the additional cost for those parents who want their children to enjoy a high-quality education overseas.

That kind of additional spending requires thorough financial planning by families who want to have a second child. Thus aside from benefits for the baby product manufacturers and the child care industry, which are obvious, potential wealth management demand by middle-class Chinese families is likely to rise. From children’s health care to overseas education, the end of the one-child policy in China will boost the demand for financial planning, savings and investment management products.

Take education overseas as an example: according to the latest data from China’s Ministry of Education, 459,800 Chinese students went abroad in 2014, an 11.1% increase over the year before. In general, students are going abroad at a younger age, as of 2010, nearly 20% of all Chinese overseas students held an academic certificate below the high school level. As more and more families consider such a long-term and extensive financial commitment that overseas education involves, they will increasingly look for professional help with financial planning. As they want to pick the best risk and return balance for their savings, they will look for tailor-made education wealth management products.