China is making its population policy a central pillar of its economic strategy as it prepares to release new demographic data on 19 January, expected to confirm a fourth consecutive annual population decline. Facing an ageing society and a shrinking workforce, Beijing is introducing its most extensive measures yet to reverse the falling birth rate.
According to Reuters estimates, the government could spend around 180 billion yuan ($25.8 billion) in 2026 to encourage births. The figure includes the cost of a national child subsidy, launched for the first time last year, and expected insurance reimbursements. Authorities have pledged that women will face “no out-of-pocket expenses” during pregnancy, with all medical costs including in vitro fertilisation fully covered under the national medical insurance fund.
China’s finance ministry has not commented on the projections, though economists said the estimates align with their expectations. The government’s renewed focus follows years of strict population control policies that reduced poverty but reshaped family structures across the country.
Shrinking Population and Limited Policy Impact
China’s population has been contracting since 2022, while its fertility rate has fallen to roughly one birth per woman far below the 2.1 needed for stability. Demographers warn that a smaller population could mean slower consumption growth, fewer households, and greater pressure on pension budgets.
Xiujian Peng, a senior research fellow at the Centre of Policy Studies at Victoria University in Australia, said the latest measures were unlikely to spark a major turnaround. “Their impact is likely to be limited. Low fertility is a widespread challenge across East Asia,” she noted.
The United Nations projects that the number of Chinese women of reproductive age will fall by more than two thirds, dropping below 100 million by the end of the century. Similar challenges in Japan, South Korea and Singapore despite heavy investment in pro-natalist policies highlight the difficulty of reversing demographic trends once they take hold.
Subsidies and Social Shifts
Beijing’s new national childcare allowance, introduced in 2025, pays 3,600 yuan ($500) annually per child under three. With about 30 million eligible children, subsidies could reach 108 billion yuan this year. Meanwhile, research firm Trivium China estimates that reimbursing pregnancy and childbirth costs will add another 70 billion yuan to the national medical insurance fund in 2026.
The government’s 15th five-year plan commits to promoting “positive views on marriage and childbearing” and easing the cost of education, housing and parenting through subsidies and tax credits. However, many young Chinese cite economic uncertainty, long working hours, and rising living costs as barriers to starting families.
Yi Fuxian, a demographer at the University of Wisconsin-Madison, said decades under the one-child policy had reshaped social attitudes. “For many people, having one or no child has become the norm,” he observed.
End of Tax-Free Contraceptives
In a symbolic policy shift, China ended the tax exemption on contraceptives on 1 January, imposing a 13% value-added tax on condoms, birth control pills and other products. Demographers view the move as a sign that Beijing’s focus has turned from limiting births to encouraging them.
Reckitt-owned Durex declined to comment on the decision, while users on China’s RedNote social media platform mocked the policy. “What gives people the confidence to have children has never been the price tag on a condom, but their faith in the future,” one user wrote.
with inputs from Reuters
