China to tax contraceptives in bid to improve birth rates

Amid a historic low birth rates and economic pressures from its aging population, China will eliminate a decades-old tax exemption on contraceptives.

China aims to impose a single strategy to deal with a falling birth rate that threatens its long-term stability. Starting January 1, 2026, the government will levy a 13% value-added tax (VAT) on various contraceptives, including condoms.

The decision amends the value-added tax law, which in 1993 exempted contraceptive products from taxation. At the time, the measure was part of China’s efforts to contain its accelerating population growth. However, this policy has become an obstacle for the world’s second-largest economy, whose growth and stability are under strain due to the marked aging of its population and the decline in the birth rate.

The National Bureau of Statistics reported that in 2024, China recorded a slight increase with the birth of 9.54 million babies, about 520,000 more than in 2023. However, the birth rate per 1,000 stood at 6.77 last year, the second lowest level in the history of the People’s Republic of China, in 2022. the lowest was in 2023 at 6.39 percent. 1,000.

The country’s total population has been in steady decline for three years. In 2024, there would be just over 1.408 billion inhabitants, a drop of 1.39 million over one year. In April 2023, India overtook China to become the world’s most populous country.

Experts warn that this trend will have profound consequences for the economy of the main American rival. A Oxford Economics report notes that potential output growth (an indicator measuring the maximum expansion that can be achieved without generating inflationary pressures) could fall below 4% in the 2030s due to a shrinking labor force and slowing productivity.

Since 2021, Chinese authorities have launched various initiatives to reverse population decline. These include what they call “the new culture of marriage and motherhood”, a policy that supports families consisting of a mother, father and three children by providing subsidies for each birth. It also expands childcare services and extends paternity and maternity leave. Additionally, the country discourages abortions by classifying the procedure as non-essential treatment.

Despite these efforts, experts say China’s chances of reversing its low birth rate are slim, especially since it is one of the most expensive countries to raise children. According to a 2024 analysis by the YuWa Population Research Institute, the average cost of raising a child to age 18 is about 538,000 yen (about $76,000).

In this context, demographer He Yafu explained in statements quoted in Bloomberg that “the removal of the VAT exemption is largely a symbolic effort and is unlikely to generate a significant impact on a national scale.”

This story was originally published on WIRED in spanish and was translated from Spanish.