China has removed a three-decade-old tax exemption on contraceptive drugs and devices, imposing a 13% value-added tax on items such as condoms and contraceptive pills from Jan. 1, in a fresh bid to arrest a prolonged slide in birth rates.
The change subjects most contraceptives to the standard VAT applied to consumer goods in the world’s second-largest economy. It marks a policy shift after years in which such products were treated as tax-exempt public health items, and it arrives as Beijing ramps up efforts to encourage more marriages and births.
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China’s population declined for a third straight year in 2024, underscoring demographic pressures that have deepened despite successive rounds of pro-natal policies. At last month’s Central Economic Work Conference, top leaders renewed a pledge to promote “positive marriage and childbearing attitudes” to stabilize birth rates, signaling that demographic recovery remains a top policy priority.
The new tax framework effectively raises out-of-pocket costs for contraception at the retail level, though officials did not publish detailed guidance on enforcement or carve-outs for specific products. The move aligns with a broader policy shift that has unfolded since Beijing ended its one-child policy in 2015 and later allowed families to have three children, while urging local governments to expand childcare services and reduce education burdens. Those efforts have yet to overturn entrenched economic and social headwinds dampening fertility.
China’s birth rate has trended lower for decades, shaped initially by the one-child policy and accelerated by rapid urbanization. More recently, high housing, childcare and education costs, job-market uncertainty and a slower economy have discouraged many young people from marrying and starting families. The result is a structural demographic challenge—fewer births, a shrinking workforce and a fast-aging population—that Beijing has cast as a risk to long-term growth and social stability.
Population experts widely expect the downturn to continue in the near term, even as central and provincial authorities experiment with incentives ranging from housing support to expanded parental leave. Policymakers are also urging the development of more affordable childcare, including nurseries for children under 3, to ease the financial and time pressures that parents cite as barriers to having more children.
The removal of the tax exemption on contraceptives adds a new dimension to that policy mix. While it may align with efforts to encourage larger families, the practical impact will depend on pricing, availability and how consumers respond to higher costs at the margin. Beijing has not indicated whether public-health programs or targeted subsidies will offset the VAT for certain groups, such as students or low-income households.
As China navigates the trade-offs of stimulating births while managing public-health priorities, officials are expected to keep demographic stabilization high on the agenda through 2025. The government’s signal at the year-opening policy meetings is clear: reversing the birth slump is now integral to economic planning, and fiscal measures—down to the tax code for everyday items—are being recalibrated to that end.
By Abdiwahab Ahmed
Axadle Times international–Monitoring.
