Since the one-child policy was further relaxed in November 2013 with its current form stipulating that couples are allowed to have two children if one of them is an only child, the Communist Party of China Central Committee announced an end to the “one-child policy” as China will allow all couples to have two children. According to the National Bureau of Statistics, the number of young women of childbearing age (20-44 years) reached 251.2 million in 2015. There is no doubt that China’s emerging baby boom is fertile ground for both domestic and international companies in baby and child-related industries.

Models for children's wear wait for a show during China Fashion Week in Beijing. Andy Wong /AP

Models for children’s wear wait for a show during China Fashion Week in Beijing. Andy Wong /AP

Children’s footwear and childrenswear witnessed dynamic current retail value growth of 9% and 8%, respectively, in 2015, from an already sizable base. More notably, baby and toddler wear registered 15% growth in value terms in 2015. To benefit from such market dynamics, many apparel companies increased their investments in the childrenswear market in 2015. For example, the womenswear company Lancy Co Ltd acquired stock of Agabang & Co Ltd and officially entered the childrenswear market in China in 2014. Agabang & Co Ltd is the second largest childrenswear company in South Korea and owns eight product series with different brand positions and product designs. The cooperation between Lancy Co Ltd and Agabang & Co Ltd also indicated that more international childrenswear companies are seeking opportunities to enter the Chinese market to gain a foothold.

OUTLOOK

According to the estimation by players in the childrenswear industry, during 2016-2020 some 26.3 million new babies will be born each year. Full implementation of the two-child policy will continue to drive demand in the childrenswear market in China. Baby and toddler wear is expected to record the most dynamic CAGR of 11% in constant value terms among apparel and footwear categories over the forecast period. Meanwhile, children’s sportswear is anticipated to be a promising category, mainly benefiting from the consistent commitment of current players and expected new entrants, and the growing affluence of parents. For example, Under Amour plans to launch a children’s sports series in 2016, while local brands such as Anta and 361 Degrees will increase the proportion of children’s sports apparel in their businesses.

Image by TheWorldOfChinese

Image by TheWorldOfChinese

Although full implementation of the two-child policy could spur growth of the entire childrenswear market, there will still be variations across different regions. In first- and second-tier cities, people lead very hectic lifestyles and living costs are much higher. This has resulted in many couples being more cautious when making the decision to have a second child. In lower-tier cities and rural areas people face comparably less pressure in terms of living and time costs. As a result, it is expected that full implementation of the two-child policy will have a higher impact in lower-tier cities and rural areas for the childrenswear industry in China, which means there will be greater potential in these areas. Hence, childrenswear companies are likely to put more emphasis on conquering and exploring markets of peripheral cities over the forecast period.

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