Why ASX investors should take note of China's latest family policy changes | Pendal Group
Hi there! Welcome to the new look Pendal website... Take a two minute tour to see what we’ve changed.

Mainstream Online Web Portal

Investors can view their accounts online via a secure web portal. After registering, you can access your account balances, periodical statements, tax statements, transaction histories and distribution statements / details.
Advisers will also have access to view their clients’ accounts online via the secure web portal.

Why ASX investors should take note of China’s latest family policy changes

  • Tech and education crackdown sends Chinese shares falling
  • China government aims to ease cost of living pressures
  • Questions over risk-reward balance for investors

CHINESE regulators this week outlined reforms that will ban private firms that teach the school curriculum from generating profits, raising capital or going public.

The move was aimed at reducing cost-of-living expenses for Chinese familes, who are now encouraged to have three children.

The changes caught investors by surprise. Shares in Chinese private education companies inside and outside the country plummeted.

But this policy shift also has potential implications for a number of Australian-listed companies, in areas such as infant formula.

“There’s two interesting aspects here,” says Elise McKay, an analyst in Pendal’s equities team.

“First of all, China needs to address its population problem.”

Pendal equities analyst Elise McKay
Pendal equities analyst Elise McKay

“New births have fallen off in China to the lowest level since the famine in 1961. Women of child-bearing age are having fewer children and the population is ageing. This causes real issues.”

“COVID has accelerated this because some people are putting off pregnancy while they get vaccinated or to avoid getting COVID while they are pregnant.”

“The new policy is to lower the cost of raising a child and boost birth rates. They also want to reduce inequality amongst those who can afford to pay for after school tutoring and those who cannot,” says McKay.

Lifting China’s birth rate is potentially good news for businesses that sell to Chinese families, including Australia’s high-profile suppliers of infant formula. 

However there is a second aspect to this shift.

“There’s also this increasing uncertainty around regulation, particularly in public companies,” says McKay.

“We need to watch for signals of regulation around pricing for infant formula – this also affects the cost of rearing children.”

Pendal Focus Australian Share Fund

A high-conviction equity fund with 16 years of strong performance in a range of market conditions

“We may also see China look to prioritise domestic brands.”

There are several recent examples of greater intervention in markets. The move in education comes after similar crackdowns in technology, payments and ride-hailing.

A high-profile investigation into ride-hailing firm Didi’s handling of customer data that halved the newly-listed company’s share price.

And it follows a regulatory inquiry into tech giant Alibaba earlier this year that scuppered the float of its payments arm Ant.

A higher birth rate could be an opportunity for Australian companies. But the prospect of more regulation and the prioritisation of domestic brands may shift the balance of risk against investors.

“It’s very nuanced,” says McKay. “And it’s a case for actively managing risk. It is a development that we will be watching very closely.”

About Elise McKay and Pendal

Elise is an investment analyst with Pendal’s Australian equities team. Elise previously worked as an investment analyst for US fund manager Cartica where she covered a variety of emerging market companies.

She has also worked in investment banking and corporate finance at JP Morgan and Ernst & Young.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

Find out about Pendal Focus Australian Share Fund here.  

Find out about Pendal Horizon Fund here.

Contact a Pendal key account manager here.


This article has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and the information contained within is current as at July 28, 2021. It is not to be published, or otherwise made available to any person other than the party to whom it is provided.

This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.

The information in this article may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this article is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.

Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance.

Any projections contained in this article are predictive and should not be relied upon when making an investment decision or recommendation. While we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.

The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund.

Keep updated
Sign up to receive the latest news and views