China’s long-running experiment with population control has entered a dramatic reversal, with demographic policy now taking centre stage in Beijing’s economic planning as authorities confront a shrinking and rapidly ageing society. Official population data due on January 19 is expected to confirm a fourth consecutive annual decline in China’s population, underscoring the urgency behind the government’s most expansive effort yet to encourage couples to have children.
At the heart of the push is money. According to estimates, China could spend around 180 billion yuan ($25.8 billion) in 2026 on measures designed to lift birth rates. That figure includes a national childcare subsidy introduced for the first time last year, as well as expanded medical insurance payments linked to pregnancy and childbirth. Economists say the scale of spending reflects how closely population trends are now tied to Beijing’s broader economic goals.
China’s population has been contracting since 2022 after decades of strict birth limits that helped reduce poverty but reshaped family structures. With hundreds of millions of workers expected to retire in coming decades, a smaller labour force threatens growth, strains pension systems and complicates efforts to boost domestic consumption at a time when policymakers are also trying to rein in debt.
Demographers warn that fewer children today mean fewer households tomorrow, translating into slower consumption growth over the long term. That risk has pushed Beijing to frame fertility not just as a social issue, but as a macroeconomic one.
Among the most significant measures is a pledge that from 2026 women will face “no out-of-pocket expenses” during pregnancy. All medical costs, including in vitro fertilisation, are to be fully reimbursed through the national medical insurance fund. The finance ministry has not publicly commented on the estimated cost, but analysts say it broadly aligns with official signals about policy direction.
A nationwide childcare allowance rolled out in 2025 marked another break from the past. The benefit provides 3,600 yuan ($500) per year for each child under the age of three and is exempt from income tax. With roughly 30 million children in that age group, annual payouts could reach about 108 billion yuan. State media reports that more than 24 million applications have already been filed, suggesting strong take-up despite modest payment levels.
Policy research firm Trivium China estimates that reimbursing pregnancy and childbirth costs will add roughly 70 billion yuan to medical insurance spending in 2026, equivalent to around 2% of the fund’s projected payouts. The group argues that while the policy will not transform fertility trends, it could meaningfully reduce the immediate cost of childbirth and free up household income for other consumption.
Yet many experts doubt that higher spending alone will reverse deeply entrenched demographic patterns. China’s fertility rate is among the lowest in the world at around one birth per woman, far below the 2.1 level needed to stabilise population size. The rate is expected to fall further as the pool of women of reproductive age shrinks sharply over coming decades, according to projections by the United Nations.
“Low fertility is a widespread challenge across East Asia,” said Xiujian Peng, a senior research fellow at the Centre of Policy Studies at Victoria University. He noted that Japan, South Korea and Singapore have all poured substantial resources into pro-natalist policies with limited success. “This experience suggests there is no quick or simple fix,” Peng said.
Comparisons with regional peers highlight the scale of the challenge. China’s subsidies broadly resemble Japan’s long-standing family support schemes but remain well below the levels seen in South Korea, which spent nearly $65 billion in 2025 trying to arrest its own fertility decline. Despite that spending, neither country has achieved a sustained rebound in births.
Beyond financial incentives, demographers argue that structural issues loom larger. High education costs, job insecurity among young people and persistent gender inequalities continue to discourage family formation. Women in particular face career penalties linked to motherhood, while long working hours leave little room for childcare.
Beijing’s new 15th five-year plan, which begins this year, acknowledges some of these constraints. It promises to refine pro-birth policies by promoting “positive views on marriage and childbearing” and lowering the costs of childbirth, parenting and education through subsidies and tax credits. Officials have also signalled support for expanding childcare services, though concrete details remain limited.
In a symbolic shift, China has also moved to dismantle remnants of its population-control era. From January 1, a 13% value-added tax was imposed on condoms, contraceptive drugs and other birth-control products, ending decades of tax exemptions that once supported the one-child policy. Demographers say the move underscores how official priorities have flipped from limiting births to encouraging them.
For many Chinese, however, attitudes shaped by decades of policy and social change are slow to fade. Yi Fuxian, a demographer at the University of Wisconsin–Madison, says having only one child—or none at all—has become the norm. “Policy can reduce costs, but it cannot easily rebuild confidence in the future,” he has argued.
Consumer reaction to the new contraceptive tax has been telling. Reckitt-owned Durex, one of China’s best-known condom brands, declined to comment on the impact, while users on the RedNote social media platform mocked the measure, saying it would not change their behaviour.
As one widely shared post put it: “What gives people the confidence to have children has never been the price of a condom, but their faith in the future.” That sentiment captures the dilemma facing Beijing—one that no amount of spending may be able to solve quickly, even as demographic pressures mount.
