China to End Decades-Old Contraceptive Tax Exemption Amid Persistently Low Birth Rates

Faced with record-low birth rates and mounting economic pressure from a rapidly aging population, China is set to scrap a decades-long tax exemption for contraceptive products, as part of an unconventional strategy to address the demographic decline that threatens the country’s long-term stability.

Starting January 1, 2026, the Chinese government will impose a 13 percent value-added tax (VAT) on a full range of contraceptive items, including condoms.

The new policy amends the 1993 Value Added Tax Law, which originally exempted birth control products from all taxation as part of the country’s mid-1990s campaign to slow rapid population growth. Today, however, the decades-old exemption has become out of step with China’s current economic and demographic reality. As the world’s second-largest economy, China’s growth and long-term stability are now strained by dramatic population aging and a continuously falling birth rate.

Official data from the National Bureau of Statistics shows China recorded a small uptick in births in 2024, with 9.54 million babies born that year – roughly 520,000 more than in 2023. Even so, the 2024 birth rate hit 6.77 births per 1,000 people, tying 2022 for the second-lowest birth rate recorded since the founding of the People’s Republic of China. The all-time low was registered in 2023, at 6.39 births per 1,000.

China’s total population has shrunk steadily for three consecutive years. In 2024, the country’s total population stood at just over 1.408 billion, marking a year-over-year decline of 1.39 million. Back in April 2023, India overtook China as the world’s most populous country.

Analysts warn this ongoing demographic shift will have deep, long-lasting impacts on China, the United States’ main global competitor. A report from Oxford Economics projects that China’s potential output growth – a metric measuring the maximum economic expansion a country can sustain without triggering inflation – could drop below 4 percent in the 2030s, dragged down by a shrinking labor force and slowing productivity growth.

Since 2021, Chinese authorities have rolled out a wide suite of policy initiatives to reverse population decline. These include promoting what the government calls “a new culture of marriage and childbearing”, offering cash subsidies for each birth to families with three children, expanding affordable public childcare services, extending paid maternity and paternity leave, and discouraging abortion by reclassifying the procedure as non-essential medical treatment.

Despite these efforts, experts widely agree that China has very slim odds of reversing its low birth rate trend, especially because raising children in China is among the most expensive in the world. According to a 2024 analysis by the YuWa Population Research Institute, the average cost of raising a child to age 18 in China is around 538,000 yuan (approximately $76,000), a figure that lines up with the original report’s conversion (the original translated text contained a typo listing the currency as yen).

Against this backdrop, demographer He Yafu noted in comments quoted by Bloomberg that “the elimination 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 by WIRED en Español and is adapted from the original Spanish report.