China Ends Contraceptive Tax Exemption to Boost Birth Rates

China has ended a three-decade-old tax exemption on contraceptive drugs and devices, a move aimed at addressing the country’s rapidly declining birth rate. Starting January 1, condoms, contraceptive pills, and related products are now subject to a 13% value-added tax (VAT), which is the standard rate applied to most consumer goods in China.

The policy change comes as Beijing intensifies efforts to reverse a prolonged demographic downturn. China’s population declined for the third consecutive year in 2024, underscoring growing concerns about labor shortages, economic growth, and long-term social stability in the world’s second-largest economy. Demographers and economists have warned that without significant policy intervention, the population decline is likely to continue in the coming decades.

China’s falling birth rates are rooted in multiple structural factors. The one-child policy, enforced between 1980 and 2015, fundamentally reshaped family planning norms and reduced fertility over generations. Rapid urbanization, rising living costs, and changing social values have further contributed to fewer marriages and delayed childbearing. High housing prices, expensive childcare, rising education costs, job insecurity, and a slowing economy have made starting a family less attractive for many young Chinese couples.

In recent years, Chinese authorities have rolled out a series of “fertility-friendly” policies to encourage marriage and childbirth. These include exempting childcare subsidies from personal income tax, introducing annual childcare allowances, and encouraging universities to promote positive views on love, marriage, family, and fertility through educational programs. At the Central Economic Work Conference held last month, top leaders reiterated their commitment to fostering “positive marriage and childbearing attitudes” as part of a broader strategy to stabilize population growth.

While removing tax exemptions on contraceptives has sparked debate, policymakers view it as one element of a wider demographic strategy. Whether such measures will significantly impact China’s birth rate remains uncertain, as many experts argue that deeper economic and social reforms are needed to make parenthood more affordable and appealing for younger generations.