Along with profits, ‘dragon baby’ boom brings risks

(Ecns.cn)--Newborn babies are expected to hit China in droves this year as the Year of the Dragon--the most auspicious year of the Chinese zodiac--unfolds, fueling a boom in the childcare industry worldwide, reports the International Herald Leader.

Babies born during a dragon year are traditionally believed to have a rosy future, spurring birth rates. A Xinhua report from last December revealed that China was preparing for a five percent increase in births in the coming lunar year, with Shanghai expecting 180,000 newborns and Beijing 200,000.

Along with the Chinese mainland, Taiwan, Hong Kong, Macau and overseas Chinese communities all expect a spike in birth rates this year.

Statistics show that Hong Kong experienced a birth rate increase of 5 percent during the last Year of the Dragon in 2000; the birth rate in Taiwan jumped from 1.5 births per woman in 1999 to 1.7 in 2000; and Singapore also saw a birth rate rise of over 10 percent in both 2000 and 1988.

As a result, parents-to-be are currently suffering from a severe shortage of midwives and nannies, which has led to a sharp rise in salaries for these highly sought-after occupations.

According to the West China Metropolis News, wages for nannies, which typically range from 4,000 to 7,000 yuan (US$635-1111), have increased by over 20 percent in recent weeks.

"If you want to hire a nanny, you have to make an appointment first. As the Year of the Dragon arrives, market demands have been booming. Now, a couple is likely to arrange an appointment with us soon after the woman is confirmed pregnant," Wu Xingying, a consultant at Hong Kong-based BBcare Health Service Center, points out.

"When we are shorthanded, an inexperienced nanny who works eight hours a day and six days a week is paid HK$12,000 (US$1,547) per month, about 1.5 times the average salary in previous years. But an experienced one can earn at least HK$30,000 (US$3,868) a month," Wu adds.

Price tags on products for infants have also skyrocketed, according to China Daily, with disposable diapers increasing from 130 yuan to 180 yuan a pack, and decent baby clothes costing twice as much as last year.

Norman, the CEO of an Australian company, tells the International Herald Leader that they decided to focus on infant milk powder last year after research revealed enormous potential in the Chinese market because of a coming baby boom in 2012.

In Hong Kong, dragon babies have already become a cash cow for many companies looking to make big fortunes on the boom, according to a securities analyst.

Moreover, a survey among mothers shows that over 70 percent of respondents are willing to invest heavily to keep their children trendy, which also creates considerable business opportunities.

Lv Yihao, CEO of Boshiwa International, a leading retailer of children's products, claims that dragon-themed children's clothes have gained popularity among their customers.

The Prince Frog, a child product manufacturer, also expects a promising market as Li Zhenhui, CEO and board chairman, says the company would focus more on products for children 3 years old and under.

Even Chou Sang Sang, a leading gold and jewelry producer, has launched accessories such as bracelets and pendants based on the Chinese zodiac.

An industry insider adds that at a trade fair this year, products for infants were priced 5-10 percent higher than last year.

With such a thriving market, dragon-baby concept stocks have been going up. On Friday, Prince Frog (01259) closed at 3.27, up 11 percent, on the HK stock exchange, while Boshiwa Int'l (01698) was at 2.69, up 3.9 percent.

BNP Paribas, a global banking group, analyzes that the "dragon baby boom" will certainly emerge and promote consumer demand for infant milk powder, diapers, baby clothes and other baby products.

Yet as opportunities and risks always co-exist, the International Herald Leader warns that individuals and companies who dream of raking in tidy profits should look before they leap.

The "dragon-baby effect" might be a fleeting show, the newspaper suggests, as previous data show that related businesses would likely go down after the baby boom.

Many also worry that the performance of dragon-baby concept stocks may be driven by speculation.

Bai Ren, vice president of the research center at Bank of China, explains that such concept stocks are a good choice only for short-term investment.