China will start taxing condoms and other contraceptives for the first time in three decades, as it searches for ways to lift one of the world’s lowest birth rates.

Under a revised Value-Added Tax (VAT) Law passed at the end of 2024, condoms and oral contraceptives will lose their tax-exempt status and be subject to up to 13 percent VAT starting Jan. 1, 2026.

The change ends an exemption in place since 1993, when the One-child Policy was in full force, and the state promoted widespread use of birth control.

At the same time, matchmaking agencies have been added to the tax‑exempt list.

The revised law also introduces new tax breaks for services the government says support family formation: childcare from nurseries to kindergartens, elder-care institutions, disability services, and marriage-related businesses.

The move comes as Chinese authorities push a wider set of policies aimed at improving population structure and strengthening fertility support, as China faces low births and rapid aging.

Demographic Crisis

Official data show China’s population fell for the third straight year in 2024, dropping by 1.39 million to about 1.408 billion as deaths again outnumbered births.

The country recorded 9.54 million births and 10.93 million deaths in 2024, a negative natural growth rate of roughly -1 per 1,000 people.

Births, meanwhile, have more than halved in less than a decade.

In 2016, China registered about 18 million newborns. By 2023, that figure had fallen to about 9 million while deaths rose to 11.1 million, according to the Peterson Institute for International Economics (PIIE).

The Washington-based think tank has described the decline as “close to irreversible” without deep structural reforms.

China’s total fertility rate is estimated at about 1.09 births per woman—well below the roughly 2.1 needed to keep a population stable—placing it among “ultra-low” fertility countries such as South Korea and parts of Europe, according to Apollo Academy’s analysis of U.N. population projections.

The analysis also forecasts that China’s working-age population could shrink from about 900 million today to roughly 250 million by the end of the century if current trends hold.

The rapid aging of China’s population is adding financial pressure.

By the end of 2024, about 310 million people were aged 60 or over, around 22 percent of the population, and some 220 million were 65 or older, according to China’s State Council data.

Beijing’s own projections suggest that people over 60 could make up around 30 percent of the population by 2035, and more than 400 million people could be in that age group.

That shift is already squeezing China’s pay-as-you-go pension system, in which contributions from current workers and employers are used to pay current retirees rather than being fully saved in advance. As the number of retirees grows faster than the number of workers, the system comes under strain.

Studies by the Chinese Academy of Social Sciences and other researchers have warned that the main urban basic pension fund could face depletion around 2035 without reforms or large transfers of state assets, pushing Beijing to begin raising the statutory retirement age from 2025 for the first time in 70 years.

From One-Child to Three-Child Policy

The new contraceptive tax marks a symbolic break with the era when the Chinese Communist Party (CCP) devoted enormous resources to stopping people from having “too many” children.

China’s One-Child Policy, introduced nationwide in the late 1970s and early 1980s and enforced until 2015, restricted most urban couples to a single child.

Enforcement varied by region and social status, but in many areas it relied on fines, intense monitoring, and, in some cases, coerced abortions and sterilizations.

Between 1980 and 2014, more than 300 million women had intrauterine devices (IUDs) inserted under state family-planning programs, and more than 100 million were sterilized.

In 2015, Beijing formally ended the one-child rule and allowed all couples to have two children from 2016.

When that change failed to generate a sustained baby boom, authorities moved again in 2021, adopting a Three-Child Policy and scrapping most penalties for “out-of-quota” births.

A recent legal study in the Jindal Global Law Review describes this shift as a clear policy “overturn”—from strict birth control to “natalism,” a state-backed push to raise birthrates.

It argues the system still relies on a top-down approach that keeps women’s reproductive choices tightly constrained by law and policy.

Berlin-based think tank Mercator Institute for China Studies (MERICS) says Chinese propaganda increasingly frames childbearing as a “national duty,” citing party-linked health authorities urging young people to embrace “beautiful love, harmonious family, and happy life in the new era.”

It also notes that China’s legal framework now calls for marriage and childbearing at an “appropriate age,” with official commentary defining that as roughly ages 23–28 for women.

High Costs, Weak Job Prospects, and Fewer Marriages

So far, however, the policy shift has done little to change the pressures shaping family decisions for young Chinese adults.

Studies show that raising a child in China is among the most expensive in the world relative to income.

A report by the Beijing-based YuWa Population Research Institute estimates the cost of raising a child to age 18 at about 6.3 times China’s per-capita GDP, and puts average spending at roughly 680,000 yuan (about $95,000) to support a child through university—higher still in major cities once housing, schools, and extracurricular activities are factored in.

Youth unemployment has also remained elevated despite headline economic growth.

In August, official data put youth unemployment (aged 16 to 24) at about 19 percent—the highest since the regime introduced a revised methodology in December 2023 that lowered the rate by excluding students.

By comparison, the OECD’s youth unemployment average stood at 11.2 percent in July, with the United States at 10.8 percent and Japan at 4.1 percent.

These strains help explain why fewer people are marrying.

Ministry of Civil Affairs data show about 6.1 million couples registered marriages in 2024, down more than 20 percent from 2023, down for the fifth year in a row, and the biggest drop on record.

The national marriage rate fell to around 4.3 per 1,000 people, and demographers expect further declines as more young people delay or avoid marriage altogether.