China Ends Contraceptive Tax Break in Effort to Boost Birth Rate
China has unexpectedly ended a three-decade-long tax exemption on contraceptive drugs and devices,a move signaling a significant shift in policy as the nation grapples with a rapidly declining birth rate. Effective January 1, condoms and contraceptive pills will be subject to a 13 percent value-added tax, aligning them with the standard rate applied to most consumer goods.
The surprising decision underscores the urgency with which Beijing views the demographic crisis unfolding in the world’s second-largest economy. China’s population has contracted for three consecutive years, including in 2024, and experts predict this downward trend will persist.
The government is concurrently pursuing a multi-pronged strategy to encourage families. Last year, China exempted childcare subsidies from personal income tax and introduced an annual subsidy program.These initiatives followed a series of “fertility-pleasant” measures implemented throughout 2024, including directives to colleges and universities to promote “love education” – programs designed to foster positive perceptions of marriage, love, fertility, and family life.
“Top leaders again pledged last month at the annual Central Economic Work Conference to promote ‘positive marriage and childbearing attitudes’ to stabilise birth rates,” according to reports from the conference.
The current demographic challenges are rooted in decades of restrictive policies. China’s one-child policy, enforced from 1980 to 2015, dramatically slowed population growth. While the policy was abandoned in favor of allowing families to have up to three children, the shift has not yielded the desired results.
The economic realities facing young Chinese citizens are also a major deterrent. The escalating costs of child care and education, coupled with widespread job uncertainty and a slowing economy, are discouraging manny from starting families.
“The financial burden of raising a child in China’s major cities is simply too high for many young couples,” one analyst noted.
The removal of the tax exemption on contraceptives, while seemingly counterintuitive, might potentially be intended to signal a broader acceptance of individual reproductive choices while the government simultaneously works to create a more supportive surroundings for those who do choose to have children. The effectiveness of this combined approach remains to be seen as China navigates a demographic future unlike any it has faced before.
why: China is facing a rapidly declining birth rate and a shrinking population, creating a demographic crisis. The government is attempting to reverse this trend.
Who: The Chinese government, specifically the Ministry of Finance, made the decision to end the tax exemption. The policy impacts Chinese citizens, particularly young adults considering starting families.
What: China ended a 30-year tax exemption on contraceptives (condoms and pills) effective January 1, 2024, subjecting them to a 13% value-added tax. Simultaneously, the government is implementing pro-family policies like childcare subsidies and “love education” programs.
How did it end? The one-child policy, in effect from 1980-2015, significantly slowed population growth.While abandoned, allowing up to three children hasn’t reversed the decline. The current strategy combines removing the contraceptive tax break with incentives to encourage childbirth, but its success is uncertain given economic pressures and changing societal values. The situation remains ongoing,with the long-term effects of these policies yet to be determined.
