Companies hope to get a boost from 'baby boom'

Even before the announcement, sales in the SUV and MPV segments in the first six months of this year increased 45.9 percent and 15.1 percent respectively, compared to the same period in 2014.

That is expected to continue to grow as new customers look for more spacious vehicles, Mintel Group Ltd, a privately owned market research firm in the United Kingdom, reported.

The numbers look certain to back that up.

Each year, there are between 16 million and 17 million babies born in China, official figures showed, and that is likely to increase to about 20 million.

"The extra 3 to 4 million new babies will provide an additional boost to categories such as infant milk, diaper, baby toiletry, toys, accessories, and education," Yu at Kantar Worldpanel said.

Companies that specialize in quality baby-care products at the right price will be the big winners.

"Our experience in developed countries showed that parents are typically smarter when it comes to buying baby products," Yu said. "We feel brands with strong values, regardless of being local or global, will benefit more."

Still, many couples in major cities will decide to have just one child because of the financial burden of raising two. High-income families are expected to take advantage of the new policy.

In a study by Mintel Group, 58 percent of Chinese moms said they managed household finances, making them the prime target for major brands.

"For the next few years, it will be imperative to understand the lifestyle and value of Millennial Moms (post-1985 and 1990s) as they reach the stage of having a family," Philix Liu, an analyst of Asia-Pacific trends at Mintel China, said.

"In terms of the retail sector, lower-tier cities would be the main target for brands, as it is more costly and burdensome to afford two children in one household in first-tier cities," Liu added.

To what extent the expected baby boom will affect consumption is still unclear.

The high cost of raising two children could reduce household spending in other areas. There is also the age factor to consider.