Abstract: This paper examines the impact of China’s two-child policy on household risky asset allocation.Since the 1970s,China’s fertility rate has declined significantly,raising concerns about economic growth,such as an aging population and labor shortages.In response,the government relaxed birth restrictions,introducing the two-child policy to address these issues.Beyond influencing fertility intentions,the policy change may affect household financial decisions.Families anticipating higher child-rearing costs might seek to invest in riskier assets to improve returns,while others may reduce risky investments due to financial constraints.Understanding how fertility policy affects household investment choices is crucial for both policy design and the long-term sustainability of economic growth.Using the selective two-child policy in 2014 as a quasi-natural experiment,this study analyzes the China Household Finance Survey (CHFS) data to examine the causal relationship between the policy and household allocation of risky assets. The findings indicate that the implementation of the two-child policy has led to a notable 7.3-percentage-point increase in the proportion of household risky assets,particularly in urban families.The study posits that families with stronger fertility preferences and higher income,who expect an increase in future child-rearing expenses,tend to invest in risky assets to increase their asset return rate.The research reveals that the increase in risky asset allocation is not due to new participation in risky asset investment,but rather an increase in risky asset allocation by households that already held risky assets and a decrease in the risk aversion of middle- and high-income households in urban areas.To test the robustness of the benchmark results,we used a series of robustness tests,including a placebo test,propensity score matching (PSM),exclusion of childless households,inclusion of rural households in the control group,addition of fixed effects,and control variables.All results are consistent with the baseline results. In conclusion,this study finds that the implementation of the two-child policy has led to a significant increase in risky investment for eligible families.The rise in the risky investment rate is closely tied to family fertility preferences and income levels,establishing a logic chain of “relaxation of birth control-increase in fertility desire-increase in liquidity demand-increase in risky investment”.The research suggests that the increase in risky investment is due to residents’ anticipated increase in child-rearing expenses,leading to a preference for risky assets to increase asset returns. The research contributes to the literature by linking fertility policy to household asset allocation and being the first to identify a causal effect of having an additional child on risky asset investment.It offers a new explanation for the low level of risky asset investment among Chinese households.The findings have important policy implications,highlighting the need for financial market reforms that take into account both the impact of population policies and the dynamic changes in household asset allocation.Policymakers should consider balancing the costs of child-rearing with opportunities for financial investment.Additionally,the government should strengthen financial market regulation to protect the rights of family investors,especially those with multiple children,and ensure greater fairness and transparency in the market.