Apparel brands see opportunity in China’s two-child policy – Nikkei Asian Review


Uniqlo childrenswear for sale in a Jakarta mall. The Japanese brand is a big seller across Asia. (Photo: Simon Roughneen)

Uniqlo childrenswear for sale in a Jakarta mall. The Japanese brand is a big seller across Asia. (Photo: Simon Roughneen)

JAKARTA — A year after China began phasing out its infamous one child policy, global sports and fashion brands are hoping to sell more babywear and childrenswear in the world’s second biggest economy.

“It seems reasonable to assume that now people are allowed to have more than one child, many will take advantage of the opportunity,” said a spokesperson for Adidas, a German sportswear giant perhaps best known for the three stripe logo that has long adorned the shirts and boots of the world’s best football players.

In a recent survey of the Chinese childrenswear market, business research group Euromonitor forecast a 62.5% sales volume increase in babywear up to 2020, with a 38.3% increase in childrenswear projected for the same period.

An Adidas spokesman told the Nikkei Asian Review that “the market for kids’ sports products and apparel continues to go from strength to strength in China and we fully expect this trend to continue.”

Similarly, a spokesperson for Japan’s Uniqlo said that the company “sees a great potential in the kids and babies market” in China, adding: “We are of course optimistic about the outlook.”

Low birth rates in Japan and Korea have prompted apparel brands such as Uniqlo and specialist childrenswear manufacturers such as Korea’s Agabang to focus on China. But Western fashion brands are also significant players. Adidas, the world’s 9th biggest apparel company according to the 2016 Fortune 500 listing, was ranked by Euromonitor as the biggest foreign player in the Chinese childrenswear market in 2015.

Other prominent Western brands in China include Sweden’s H&M and U.S.-based giants such as Gap and Nike, where they sell childrenswear alongside their better known sports and general apparel. In China, that means going head to head not only with specialist manufacturers such as Mothercare, but with the powerful local players occupying the top eight spots in the domestic market.

Not all foreign companies selling in China were willing to discuss how the two child policy might affect sales. A spokesperson for Mothercare said in answer to a query: “I don’t have information on sales in China at the moment,” while a counterpart at Nike, the world’s second biggest apparel company on the Fortune 500 2016 ranking, said “we are not in the right position of commenting this particular topic.” Gap also declined to comment.

But with births expected to increase in the world’s most populous country, there should be ample market opportunities, despite fierce local competition. Related businesses such as baby food are expected to expand in China with the ending of the one child policy, with Rabobank suggesting that demand for infant formula could increase by an annual 10% this year.

Reversing trends

It is not clear yet just how significant the market opportunities will be. In its report on the Chinese childrenswear market, Euromonitor International said “although it will take some time for the policy to impact, the announcement of this new policy suggests potential for further expansion of childrenswear.”

China’s one child policy was introduced in 1979 to slow growth in the world’s largest population, but led to tens of millions of state imposed abortions. Other consequences of the one child policy are an aging and imbalanced population. 30% of Chinese are likely to be over 65 by 2030, according to the Chinese Academy of Social Science, a government think-tank, while the Population and Family Planning Commission estimates that males of marrying age will outnumber females by at least 30 million by 2020.

Childrenswear and babywear is an increasingly prominent feature in malls across Asia. (Photo by Simon Roughneen)
Attempting to offset these trends, in 2013 China permitted a second child to couples if one of the parents was an only child. That was followed in October 2015 by the Chinese government permitting all couples to have a second child, a change that the government said would to lead to three million extra births a year.

But despite the 2013 relaxation of the one child policy for some couples, there were 320,000 fewer births in 2015 than in 2014 — a drop some suggested was down to the so-called “zodiac effect.”

February 2015 saw the start of the Year of the Sheep in Chinese astrology, with many Chinese believing that babies born that year would grow into meek adults and endure hardship in later life.

Sheep was followed by monkey in this year’s Chinese calendar, a transition that demographers contend could see more births than last year.

But it remains to be seen how many Chinese couples take up the government’s offer to allow them to have a second child — and in turn, how much demand for babywear apparel makers can expect.

Reversing the impact of the one child policy will take time. “For decades, China’s economy has developed to cater mostly to one-child families. Housing, education and other costs are often high, based partly on the expectation a couple will have only one child,” said Yi Fuxian, a Chinese scientist at the University of Wisconsin-Madison, whose 2007 book “Big Country with an Empty Nest” marked him out as an outspoken critic of his homeland’s one child policy.

By August 2015 only 1.69 million couples — or 15.4% of those eligible — had applied to have a second child under the 2013 relaxation, which was introduced on a staggered, province-by province basis throughout 2014.

“Our evidence seems to suggest that many if not most [couples] would like to have a second child, but those who intend to do so is far smaller,” said Stuart Gietel-Basten, associate professor of social policy at Oxford University.

So far, say some experts, the costs and pressures of urban life in a fast changing society appear to be deterring couples from having a second child.

“This is especially the case among urban dwellers and migrants, the former struggling with the same kinds of challenges as other parents in Asia, such as housing costs, expectations about education, lack of good cheap childcare, impact upon women’s careers, [and] poor labor market conditions,” said Gietel-Basten, whose research focuses on demography and social policy in Asia.

Follow us on Twitter
, , , ,