Which Industries Will Benefit From Two-Child Policy In China?
摘要： If the two-child policy is fully implemented, there will be 1 million to 2 million new-born babies every year and in 2018 the aggregated figure is estimated to reach 20 million. As a result, the consumption dividend derived from new-born babies is 120 billion to 160 million RMB per year and industries in food, toy, maternal and child health care, children's garments, family automobile and education are very likely to spring up.
The blossom in Mother & Baby E-Business market happened in 2013 when the government introduced the selective two-child policy. According to the statistics from China Electronic Commerce Research Center, the number of E-suppliers for baby care products reached 65 billion and in 2014 around 200 billion; In the wave of “baby boomer”, other industries from online education to healthcare are expected to embrace a spur in development.
During the Fifth Plenary Session of the 18th Central Committee closed on October 29th, Chinese government has announced am important policy: general two-child policy. Regardless of its future influence on demography and the willingness of young parents to afford two children, the policy sends out positive signals for mobile internet and commercial business related to maternal and child health care.
According to Hua Tai Securities and Founder Securities, if the two-child policy is fully implemented, there will be 1million to 2 million new-born babies every year and in 2018 the aggregated figure is estimated to reach 20 million. As a result, the consumption dividend derived from new-born babies is 120 billion to 160 million RMB per year and industries in food, toy, maternal and child health care, children's garments, family automobile and education are very likely to spring up.
Some industries will be the beneficiaries of the two-child policy, including:
China Quarter Three B2C market monitoring report in 2014 showed that the transaction volume in B2C baby care market reached 23.48 billion RMB and increased by 129% compared to 2013. E-suppliers in child care products sprang up after a large capital inflow in 2014 and today China has become the second largest consuming country in baby care products after America.
In 2015, quite a few mother & baby communities and E-suppliers have received financing including the introduction of BAT mode.
- On January 22th, 2015, Babe network, a famous E-supplier in baba care products, received a C round financing of 100 million dollars led by Capital Today, New Horizon Capital and followed by Ban Yan Capital and IDG Capital.
- On March 6th, Lamabang, a mobile mother & baby community received a C round financing of 100 million dollars, led by VIPShop and followed by Matrix Partners China, Greenwoods Capital and Morningside Ventures. The market value of Lamabang is estimated to be around 1 billion dollars.
- On July 22th, Babytree announced a financing of 250 million dollars led by Ju Mei, a vertical, cross-border E-commerce platform and followed by a couple of famous venture capitals in China. In June 2015, Babytree announced a D round financing of millions of dollars from Qianhe Capital (founded by Wang Yawei) and seek to go public in China.
- On September 8th, Mia, a E-supplier specialized in importing foreign baby care products, was reported to receive a D round financing of 150 million dollars from Baidu and followed by a few PE in the US and its former investors. Its market value is estimated to be around 1 billion dollars.
Besides the good news above, there are some statistics worth noticing.
Surveys denote that in average, expenses for a new-born baby range from 5000RMB to 18000RMB. The general two-child policy, combined with the fact that people born after 1985 and 1990 are becoming parents who have a better understanding of Internet and more open on child care expenses. Around 52% parents with babies spend more than 5000RMB per month and 63.78% spend more than 1000 RMB in online procurement. 47.03% spend more than 1000 RMB in online procurement for maternal and child products, which perks up the baby market.
Maternal and baby products have four major categories: basic products such as pacifier and nursing bottle; children’s garments; toys and food. The procurement of such products is achieved mainly through maternal supply shop (43%), shopping mall (24%) and online platform (15%). With the rise of overseas procurement, E-suppliers are trying to import diaper, formula milk powder and supplementary food as well.
Online education is sometimes accused of being hyped up by capital by the growing number of children are contributing to its prosperity. Early education and K12 (kindergarten to 12th grade) received most attention.
A survey from Tencent Technology shows that until August 2015, there have been 106 online education programs receiving financing this year, with 40 seed programs, 5 in Pre-A round, 38 in A round, 17in B round, 4 in C round and 2 in D round, among which K12 and O2O tutoring are most popular.
- On June 11th, a K12 online institution Crazy Teacher announced a 20 million dollars financing from Tencent and on July 23th, it received 24 million dollars in the B round from Kun Ling capital and Share Capital.
- In June, Qing Qing Tutor received 100 million dollars in a C round led by Good Future and followed by IDG, Trust Bridge Partners and Sequoia China. It received four rounds of financing within half a year and set a record in online education industry.
- On July 14th, O2O institution Qingtajiao announced an A round financing of 86 million RMB led by Ginkgo Group and followed by Plum Ventures, Newsion Venture Capital and Pang Dongsheng, CEO of 51.com.
- On August 25th, Good Teacher received A round financing from 58job and the number is not publicized.
- On October 28th, Hujiang Net received a D round financing of 1 billion RMB with a market value of over 7 billion RMB. Back in the February it received 100 million dollars from Baidu in the C round.
iResearh predicts that the annual growth rate of online education in China will be 19% and in 2015 the market share might be 160 billion RMB. Online education is likely to be the next trillion-level market after E commerce.
Despite its bright future, online education has some problems. Li Xiaobin, CEO and founder of Good Teacher said that although the demand is robust, we are in a shortage of good teacher resources. Quite a few online education institutions spent huge sums of money in recruiting teachers and expanding customer base while failed to scrutinize the quality, as has been reported that some undergraduates smartly disguise themselves as full-time teachers.
A survey from Mamabang revealed that among mothers who have children from 1 to 7 years, 93.6% of them have maternal-related App on their phones and 95.4% of them use those Apps to gain knowledge of baby bred.
When babies got sick most mother choose to rely on their past experience or ask for help. Some mothers are expecting mobile healthcare consultant to deliver advice or help them appoint hospitals. Given an annual increase of 1 million to 2 million babies, maternal and baby healthcare service and instruments are expected to increase as well.
The shortage of child medicine might be ameliorated. Statistics showed that among 3500 medicines, only 60 (including Chinese traditional patent medicine) are designed for children. 90% of medicines don’t have a proper child version and such shortage give rise to a ridiculous phenomenon: many doctors will prescribe some adult medicine for children in proportion with their height and weight.
The two-child policy might give rise to O2O healthcare and delivery service for medicine.
Besides the aforementioned industries, automobile might be another beneficiary of this reform as parents might want to get a new car or switch to a bigger one with more children.
Attached are some China concept stocks related to maternal and child care. Surely, investment is at the discretion of readers. (wicked face)
- Medicine: Ningbo David Medical Device (300314), Shanda Wit (000915), Hainan Honz Pharmaceutical (300086), Top Choice Medical Investment (600763), Tai An Tang (002433), JUMPCAN Pharmaceutical (600566), Yabao pharmaceutical (600351), Sunflower Pharmaceutical (002737), Jianmin Pharmaceutical Group (600976) and Guangdong Biolight Meditech (300246).
- Milk powder: Beingmate (002570), Inner Mongolia Yili Industrial Group (600887), Xinjiang Western Animal Husbandry (300106) and Beijing Sanyuan Foods (600429).
- Baby products: SATLPEC (002648), Jiangnan High Polymer (600527), C&S Paper (002511) and North Glass (002613).
- Toys: Qunxing toys (002575), Goldlok Toys Holdings (002348), Xinghui Auto Model (300043), Guangdong Huawei Toys Craft (002502), Alpha Animation and Culture (002292), Banbaoka (603398) and Rastar Group (300043).
- Chilren’s garments: JInfa Labi Maternity & Baby Articles (002762) and Semir Clothing (002563).
- Books: Jiangsu Phoenix Publishing and Media Corporation (601928), China South Publishing and Media Group (601098), Anhui Xinhua Media (601801), Hailun Piano (300329), Pearl River Piano (002678) and Guangdong Qtone Education (300359).
[The article is published and edited with authorization from the author @Han Pei, please note source and hyperlink when reproduce.]
Translated by Jackie Jia (Senior translator at Echo, working for TMTpost)