China rolls out $500 child subsidies to boost birth rate

China’s new childcare subsidy of 3,600 yuan ($500) per child under three aims to combat its plummeting birth rate and aging population. Effective retroactively from January 2025, this move is expected to benefit over 20 million families annually. However, with the cost of raising a child averaging 680,000 yuan, experts argue subsidies alone are insufficient. Factors like career pressures, high childcare costs, and cultural shifts deter parenthood. Broader structural reforms, including affordable education and childcare, are crucial to reversing the demographic decline.

China is taking a big step to deal with its ageing population and falling birth rate by offering a national childcare subsidy of 3,600 yuan ($43,000 or $500) per child under three years old. According to Chinese state media Xinhua, this move will take effect retroactively from January 1, 2025. It is one of Beijing's most comprehensive efforts to deal with its demographic problems. But will this cash incentive be enough to stop the population drop that has been going on for decades?

China's Population Crisis

China's problems with its population have hit a breaking point. In 2023, there were only 6.39 births for every 1,000 people in the country. This was the lowest birth rate ever. With 520,000 more births in 2024, there was a small comeback. However, experts say this was mostly due to short-term cultural factors, like the Year of the Dragon, which is a good time to have a baby. Even with this increase, China's population fell by two million in 2024, making it the world's second most popular country after India. This was the country's steepest population drop since 1961.

The future looks very bad because the population is going down. China will have about 400 million people over the age of 60 by 2035, which is about one-third of the country's people. Concerns have been raised about labour shortages, economic slowdown, and the long-term viability of the country's pension system because of this group of older people.

What the One-Child Policy Left Behind

The one-child policy that China had from 1980 to 2015 has had a long effect on culture. Since then, the government has changed its mind and will now allow two children in 2016 and three in 2021. However, these policy changes have not been enough to stop the sharp drop in population. Families still don't want to grow because of social and financial stresses.

The New Subsidy and What We Think It Will Do

The new childcare aid is meant to help over 20 million families every year with their finances. The subsidy will not be taxed or affect other welfare benefits, which is very important. For eligible households, it will be a straight cash boost. Similar local experiments, like Hohhot's 10,000-yuan yearly grants and Shenyang's 500-yuan monthly payments for third children, have shown promise. In 2024, the number of babies born in some places, like Tianmen, rose by 17%.

But experts warn people not to overestimate how much these cash rewards will help. Professor Mao Zhuoyan from the Capital University of Economics and Business says that subsidies might help with day-to-day costs like nappies and formula, but they probably won't cover all the costs of having a child in modern China.

The High Cost of Being a Parent

Bringing up kids in China is too expensive for most families. A 2024 study from the YuWa Population Research Institute says that it now costs an average of 680,000 yuan (₹82 lakh or $94,557) to raise a child from birth to college graduation. China is one of the most expensive places to be a parent because it takes over 538,000 yuan to raise a child to the age of 17.

The average yearly salary in China's cities was 125,100 yuan in wealthier provinces like Jiangsu and only 58,100 yuan in less lucrative fields like hospitality. These costs are much higher than those salaries. Because of this difference in income, many young Chinese couples don't want to start children.

Barriers caused by culture and society

Aside from money worries, many young Chinese people don't want to have kids because of culture and social issues. Career stresses, not having enough help with childcare, and housing that is too expensive are all common things that stop people, especially young women. The problem is made worse by later marriages, higher rates of infertility, and a societal shift towards smaller families.

Changes to the government to deal with the crisis

In addition to the childcare subsidy, Beijing has made other changes to urge people to become parents, such as

- Parents can set their own hours and work from home.

- Housing programs that give families with more than one child priority.

- Added more preschool and child care spaces.

- IVF and other fertility methods are covered by public health insurance.

- Making spinal access mandatory in all big hospitals by 2027.

Even though these changes show that the government is serious, some experts say that more systemic changes are needed to fix the problems that led to China's demographic disaster. For long-term success, you need an affordable education, easy access to child care, parental leave rights at work, and more social support networks.

Time Is Running Out

You can't say enough about how important China's population problem is. According to the United Nations, China's population could drop to 1.3 billion by 2050 and even lower, to just 633 million by 2100. That's a huge loss of over 750 million people this century.

What India Can Learn

India has more people than China, making it the world's most populous country. However, India also faces a population crossroads. In cities, the number of births is slowing down, and having kids costs more money each year. Meenal Goel, an entrepreneur from Bengaluru, recently wrote on LinkedIn that raising a child in India could cost anywhere from ₹38 lakh to ₹45 lakh, and some figures go as high as ₹1 crore.

China's experience shows how hard it is to stop a population drop. While subsidies can help in the short term, a bigger change in the way things are built is needed to make things better for families in the long run. Countries like India can learn a lot from how Beijing has changed its policies in order to find the best balance between population growth and economic security.