China rolls out $500 child subsidies to boost birth rate: But is it enough

Business Standard

5 days ago

China has announced a nationwide annual childcare subsidy of 3,600 yuan (approximately ₹43,000 or $500) per child under the age of three, Chinese state-media Xinhua reported on Monday. This is a significant step towards the country's efforts in reversing the plunging birth rate and ageing population crisis.
The initiative, retroactive from January 1, 2025, marks Beijing's most comprehensive pro-birth move yet — but will this amount, though welcome, be sufficient to reverse deep-rooted demographic trends?
What's happening with China's population?
China recorded its lowest-ever birth rate in 2023, with just 6.39 births per 1,000 people. Although 2024 saw a modest rebound of 520,000 additional births, analysts widely attribute this to a temporary post-Covid-19 recovery. Moreover, 2024 was the year of the Dragon according to Chinese zodiac signs. Children born during this year are believed to possess unique personality traits and are associated with good fortune, which could explain the rare uptick in birth rates.
However, the overall population still shrank by two million, its steepest decline since 1961, officially ceding the title of most populous country to India.
This is no small concern. By 2035, China is projected to have 400 million citizens over the age of 60—nearly one-third of its total population—raising red flags over future labour shortages, pension sustainability, and economic stagnation.
China's one-child policy
China's one-child policy, in place from 1980 to 2015, has also left a cultural imprint that will be difficult to erase. The country has been actively reversing the policy, allowing two children from 2016 and three from 2021. While these efforts are slowly being realised, they are not keeping up with the population decline.
New subsidy to aid 20 million
The new subsidy, which will not be taxed or counted against other welfare benefits, is expected to benefit over 20 million families annually, Xinhua reported. It follows years of local pilot schemes offering more generous incentives, such as Hohhot's 10,000-yuan annual grants per child and Shenyang's monthly payments of 500 yuan for third children.
While these schemes have shown some encouraging signs— Tianmen city, for instance, recorded a 17 per cent spike in newborns in 2024 —experts warn against overstating the impact of cash handouts alone.
Professor Mao Zhuoyan of Capital University of Economics and Business told Xinhua that while subsidies are helpful in easing day-to-day expenses like formula or diapers, they are not a 'cure-all' to the full cost of raising a child in China.
Cost of parenthood in China
According to a 2024 report by the YuWa Population Research Institute, the average cost of raising a child from birth to college graduation in China now stands at 680,000 yuan (about ₹82 lakh or $94,557). Even raising a child to the age of 17 costs over 538,000 yuan, placing China among the most expensive countries in the world to have children.
Compare this with average annual urban salaries of 125,100 yuan in affluent provinces like Jiangsu and just 58,100 yuan in hospitality sectors—according to Statista, based on annual salaries drawn in 2023—and it becomes evident why many young Chinese are reluctant to start families.
Parenthood crisis: What's really deterring China's youth?
Beyond finances, broader cultural and societal shifts are at play. Many young people, especially women, cite career pressures, lack of childcare support, and unaffordable housing as key deterrents to parenthood, a report by Think Global Health showed. Delayed marriages, rising infertility, and a longstanding preference for smaller families have further complicated matters.
How is the Chinese govt responding to population crisis?
In response, Beijing has been introducing a plethora of reforms. Some of these are:
Promoting flexible work hours and work-from-home options for parents
Offering preferential housing for families with multiple children
Expanding childcare and preschool infrastructure
Providing IVF and fertility treatments under public health insurance
Mandating epidural access in large hospitals by 2027
Is the subsidy too little, too late?
While the subsidy signals serious intent, experts argue it's far from a silver bullet. Yang Yiyong from the Academy of Macroeconomic Research told Xinhua that China needs affordable education, accessible child and maternity care, workplace protections for mothers, and social support structures.
And time is running out. Projections of the United Nations estimate China's population could shrink to 1.3 billion by 2050, and further to 633 million by 2100, losing over 750 million people this century.
Are there lessons for India here?
As India assumes the role of the world's most populous nation, Beijing's policy evolution holds crucial lessons. India, too, is seeing a fertility slowdown, and the economic and social costs of parenthood are rising rapidly in urban areas. Last month, a LinkedIn post by Bengaluru-based startup founder Meenal Goel went viral, where Goel estimated the cost of raising a child in India to be between ₹38-45 lakh. Other media reports suggest these costs can even go above ₹1 crore, depending on school fees, tuition, college, lifestyle, etc.
China's experiment is a sign that reversing a demographic slide is complex and expensive. Moreover, while subsidies may be helpful, a much wider structural transformation is still needed.
The bottom line
China's 3,600-yuan subsidy is a notable step, but unless backed by deeper social reforms, it may not be enough to convince families that parenthood is affordable or desirable in the modern Chinese economy.