August M
China has taken a new step aimed at reversing its long-running population decline, adjusting tax policy as part of a broader push to encourage families to have more children. The move comes amid growing concern in Beijing over demographic trends and their impact on the economy.
Officials have signalled that further measures may follow as birth rates continue to slide.
Tax change takes effect
According to Reuters, China removed a tax exemption on contraceptive drugs and devices from January 1, ending a policy that had been in place for around 30 years.
Condoms and contraceptive pills are now subject to a 13% value-added tax, which is the standard rate applied to most consumer goods in the country. The change aligns these products with wider taxation rules.
The decision reflects the government’s effort to use fiscal tools to influence demographic behaviour, as population growth remains weak.
Demographic pressure
China’s population declined for a third consecutive year in 2024, Reuters reported, underscoring the scale of the challenge facing policymakers. Experts have warned that the downward trend is likely to continue without sustained intervention.
Falling birth rates are widely seen as a risk to long-term economic growth, labour supply and the sustainability of social welfare systems in the world’s second-largest economy.
The issue has moved higher on the political agenda as China confronts slower growth and an ageing society.
Broader incentives
The tax change follows a series of measures introduced last year to make family life more affordable. According to Reuters, China exempted childcare subsidies from personal income tax and rolled out an annual childcare allowance.
Authorities have also promoted what they describe as “fertility-friendly” policies, including encouraging universities and colleges to offer “love education” designed to present marriage, family and childbearing in a positive way.
At last month’s Central Economic Work Conference, top leaders again pledged to promote “positive marriage and childbearing attitudes” in an effort to stabilise birth rates.
Long-term roots
China’s declining birth rate has deep roots. The one-child policy, in force from 1980 until 2015, reshaped family planning decisions for generations.
Rapid urbanisation, rising living costs and uncertainty over jobs have further discouraged many young people from marrying and having children. High expenses linked to childcare and education are also cited as major barriers.
Despite the latest policy shifts, analysts say reversing decades-long demographic trends will take time and may require more comprehensive support for families.
Sources: Reuters
