China Just Ended Its One-Child Policy: What It Means For Investors

• China's decades long one-child policy was officially repealed on Thursday.
• The policy was relaxed in certain regions but now all couples across China are allowed to have two children.
• Shares of Mead Johnson Nutrition CO MJN spiked higher following the news release.

The one-child policy was introduced its one-child policy back in 1979 to better control the country's birth rate and slow down the rapid population growth rate.

As part of state law, couples could have no more than one baby. Breaking this law would result in fines, the loss of employment, and even forced abortions.

Over time, the policy was updated and provided for exceptions. In 2013, the rules were changed to allow certain couples to have a second child if at least one of them were an only child.

Decades Long Policy Comes To An End

China's state-run news agency said on Thursday that it will end its one-child policy. State law now permits all couples to have two children.

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Forbes noted that China's ageing population has been called a "demographic time bomb" as there are fewer working-age people to support the ageing population. The report also questioned the timing of an announcement as a change of such a magnitude is usually held off until the nation announces its Five-Year Plan – the next of which doesn't start until next year.

When China relaxed its policy back in 2013, baby-related industries stood to benefit. Want China Times stated that the policy change in 2013 would result in an additional eight million newborns that will be "easy pickings for industries dealing in diagnostic medical devices for pregnancy, infant formula, diapers, pediatric medicine, and children toys."

Shares of Mead Johnson Nutrition Co MJN spiked higher by nearly 5 percent Thursday morning. Ironically enough, the global pediatric nutrition company was recently downgraded to Underperform from Neutral by analysts at Bank of America given the country's large exposure to China.

The analysts questioned Mead Johnson's growth profile and sustainability in margins in China. It is likely that these concerns were eased following China's announcement on Thursday.

Shares of Synutra International, Inc. SYUT, a Chinese-based infant formula company, also spiked higher Thursday morning by more than 4 percent. Synutra competes with the multi-national firms, including Mead Johnson, and sells its products across all provinces and provincial-level municipalities in mainland China.