China is set to implement an unconventional approach to tackle its declining birth rates, a situation that poses a significant risk to the nation’s long-term stability. Starting January 1, 2026, the government will impose a 13 percent value-added tax (VAT) on a range of contraceptives, including condoms. This decision revises the Value Added Tax Law, which since 1993 has exempted birth control products from taxation, a measure that was initially intended to curb rapid population growth.
However, this earlier policy has now become a barrier for the world’s second-largest economy, which faces increasing pressure from an aging population and a decreasing birth rate. According to the National Bureau of Statistics, 2024 saw a modest increase in births, with 9.54 million babies born—an increase of approximately 520,000 compared to 2023. Yet, the birth rate per 1,000 individuals stood at 6.77, matching the second-lowest recorded rate in the history of the People’s Republic of China, following the lowest rate of 6.39 in 2023.
China’s total population has been experiencing a steady decline over the last three years, with the 2024 figures revealing just over 1.408 billion residents, marking a year-on-year decrease of 1.39 million. In April 2023, India surpassed China as the most populous nation globally.
Experts caution that this demographic trend will profoundly impact the economy of China, America’s primary competitor. A report from Oxford Economics warns that potential output growth—an indicator of the highest expansion achievable without inducing inflation—could dip below 4 percent in the 2030s due to a shrinking workforce and diminished productivity.
In response to the population decline, Chinese authorities have initiated various measures since 2021. These efforts include promoting what they term “the new culture of marriage and motherhood,” which provides support to families consisting of a mother, a father, and three children through subsidies for each additional birth. Furthermore, the government is enhancing childcare services and extending maternal and paternal leave, while simultaneously discouraging abortions by categorizing them as nonessential medical procedures.
Despite these initiatives, experts remain skeptical about China’s ability to reverse its low birth rate, especially given that it is among the most expensive countries for raising children. A 2024 study by the YuWa Population Research Institute estimates that the average cost of raising a child until the age of 18 is approximately 538,000 yen (around $76,000).
In this context, demographer He Yafu remarked in comments reported by Bloomberg that “the removal of the VAT exemption is largely a symbolic gesture and is unlikely to have a significant effect on a national scale.”
This article originally appeared on WIRED en Español and has been translated from Spanish.
