After decades of curbing births, China is urgently trying to reverse a population slump that puts its economic and political future at risk.

Long seen in the West as a byword for the Chinese Communist Party’s heavy-handedness, the one-child policy became a trope for Chinese authoritarianism.

While the policy was officially scrapped in 2015 after years of looser enforcement, China now faces unprecedentedly low birth rates — and has announced it will begin offering childcare subsidies for the first, second and third child up to the age of three, starting this year.

Under the plan, families will receive what the government calls a ‘fertility bonus’ of 3,600 yuan or just over €430 per child until the age of three. 

While the national government will pay this “base” amount, local authorities are free to top it up depending on their own resources. The CCP said the nationwide rollout of cash subsidies will help ease the pressure of childcare expenses and will help to prevent a further decline in the fertility rate.

Crucially, the subsidies will be tax-exempt and excluded from calculations of household or individual income, ensuring they do not affect eligibility for minimum living allowances or extreme poverty assistance.

Why now?

In 2024, China’s total fertility (TFR) rate — the average number of children a woman is expected to have over her lifetime according to current patterns — was around 1.15 children per woman. That's among the world’s lowest and below the so-called “replacement level” of 2.1, meaning the baseline for the population size to stay the same.

Demographers use these rates to measure whether a population is shrinking, growing or staying the same. The goal of the new policy would not be to expand the population, but to keep it at a relatively similar size without seeing it skew too heavily towards an ageing population. The latter is a problem faced by many European economies.

According to the World Health Organization, by 2040, around 28% of China’s population will be over the age of 60, threatening to disrupt what used to be a growing labour force and competitive wages. This also skews the dependency ratio, with funds in the economy going to supporting elderly relatives, increased healthcare costs and pensions.

In 2022, China’s population shrank for the first time since 1961, marking a yearly drop of 850,000 people as deaths outnumbered births. In 2023, the worst year on record, the population fell by approximately 2.08 million, and the decline continued in 2024 — improving only slightly — as it fell by 1.39mn.

Chinese growth miracle is reversed

In 1978, China went through political and economic reforms, including opening up parts of its economy to combat rural poverty and absorbing hundreds of millions of workers into its labour force. It is widely considered one of the fastest economic transformations in history, with China becoming the biggest net exporter in the world and its economy growing an average of about 9.5% per year until 2018.

Of course, the economic clout came with political and diplomatic power. Now, the population decline could lead to China falling on the wrong side of the demographic dividend as its pool of available labour shrinks.

Ultra-low fertility economies

China is not the only Asian country to suffer from this problem and its effects on the economy. Several Asian countries are now considered ultra-low fertility economies, where population decline has become very steep and hard to reverse — even with pro-natalist policies like the child subsidy.

A mix of economic, cultural and demographic dynamics may reinforce a cycle of fewer births in these countries. Economically, this erodes the very demographic dividend that once fuelled the explosive growth of East Asia’s richest countries.

China announces fertility subsidy programm as births hit historic lows

China has introduced a fertility subsidy program to combat historic low birth rates, offering cash incentives for first, second, and third children up to age three. The policy aims to ease childcare costs and prevent further population decline, which threatens China's economic and political stability. The country's total fertility rate (TFR) is below replacement level, and population growth has stagnated, with record declines in recent years.