China Will Tax Contraceptives in a Bid to Improve Birth Rates

Beijing: China’s new approach to tackling plunging birth rates is turning heads. After decades of a tax exemption on contraceptives, the government is set to impose a 13 percent value-added tax (VAT) on these products starting January 1, 2026. This move reflects broader concerns over an aging population and economic sustainability.

The last time birth control was tax-free? That was back in 1993, when the state sought to control a surging population. Fast forward to today, and this exemption has become a barrier for the economy, which now grapples with the consequences of fewer births, especially as the nation faces a rapid demographic shift.

Recent statistics show a slight increase in births, with the National Bureau of Statistics recording 9.54 million newborns in 2024—up 520,000 from the previous year. However, the birth rate remains historically low, hovering at 6.77 per 1,000. This level mirrors the alarming statistics of 2022, with even 2023 hitting rock bottom at 6.39 per 1,000.

The national population has been in decline for three consecutive years, with a total of 1.408 billion recorded in 2024—down 1.39 million from the year prior. It’s a worry compounded by the fact that India has now surpassed China as the world’s most populous nation.

Economists raise alarms about the potential repercussions of this trend. A report from Oxford Economics highlights that potential output growth could slump to less than 4 percent by the 2030s, driven by a dwindling workforce and slower productivity.

Since 2021, Chinese authorities have unveiled a series of programs designed to combat declining numbers. These initiatives promote a so-called “new culture of marriage and motherhood,” which supports families by offering subsidies for each child born, enhancing childcare services, and extending maternity and paternity leave. Moreover, abortions are now categorized as nonessential, signaling a shift in policy emphasis.

Yet, experts remain skeptical. Demographers like He Yafu have stated that the removal of the VAT exemption is more of a symbolic gesture than a substantive solution. Rising costs make parenting in China daunting; a 2024 study from the YuWa Population Research Institute estimates the price tag of raising a child to age 18 at around 538,000 yen—or approximately $76,000.

With these factors in play, reversing the tide of low birth rates remains an uphill battle for China.