China rolled out on Monday an annual childcare subsidy of 3,600 yuan (about $500) until age three, as authorities look to spur a flagging birth rate with fewer young people choosing to have children.
The high cost of childcare and education as well as job uncertainty and a slowing economy are among the concerns that have discouraged many young Chinese from getting married and starting a family.
Subsidies will start from this year, with partial subsidies for children under three born prior to 2025, in a policy expected to benefit more than 20 million families of toddlers and infants, the official Xinhua news agency said.
The plan is an “important national livelihood policy” and direct cash subsidies would help “reduce the cost of family childbirth and parenting”, the National Health Commission said.
Demographers and economists said while the move was positive, the amount was likely to small to incentivise people to have children.
China’s population fell for a third consecutive year in 2024, with experts warning of a worsening downturn, after decades of falling birth rates following a one-child policy adopted from 1980 to 2015, coupled with rapid urbanisation.
In the past two years provinces nationwide have started handing out childcare subsidies in amounts that vary considerably, from 1,000 yuan a child to up to 100,000 yuan, including housing subsidies.
The central government will fund the new national policy instead of local authorities, Xinhua said. Authorities are expected to announce more details on Wednesday.
Zichun Huang, China Economist at Capital Economics, said the sums involved were too small to have a near-term impact on the birth rate or consumption.
“But the policy does mark a major milestone in terms of direct handouts to households and could lay the groundwork for more fiscal transfers in future.”
Citi Research estimates a total lump-sum payout of 117 billion yuan in the second half of this year through the plan, saying the scheme is more meaningful as a consumption policy than as a population policy.
“As a population policy, it remains to be seen whether the national program can move the needle on fertility rate,” the research house said in a note.
Authorities in China unfurled a series of “fertility friendly” measures in 2024 to tackle the coming decade’s challenge of the entry into retirement of roughly 300 million people, equivalent to almost the entire U.S. population.
A nationwide scheme may offer some coordination and signal greater central commitment, said demographer Emma Zang, a professor at Yale University, but called for greater efforts.
“Without sustained structural investment in areas like affordable childcare, parental leave, and job protections for women, the effect on fertility is likely to remain minimal,” she added. (Reuters)