Chinese demographers hail "milestone" childbirth policy but say it still falls short
Too little, but not too late?
James Jianzhang Liang is the Co-founder and Chairman of Trip.com Group, a leading travel platform, an economics professor, and a public intellectual on demographics. He is also a co-founder of Yuwa Population Research, a think tank dedicated to population studies and policy advocacy, where Huang Wenzheng serves as a statistician and demographer.
Liang and Huang have long been adamant advocates for the essential role of a sustainable birth rate and a sizeable population in ensuring China's economic prosperity and global influence. When the State Council of China introduced a package of policies on October 19—including birth subsidies, housing support, and promotion of birth policies in primary, secondary, and higher education curricula—pledging to create a "birth-friendly society," they promptly published their commentary and additional recommendations on the document.
完善生育支持政策体系最新文件是一个里程碑
The Latest Document for Improving the Birth Support Policy System is a Milestone
The State Council recently issued Several Measures on Accelerating the Improvement of the Birth Support Policy System to Promote the Establishment of a Birth-Friendly Society, which stands as the most proactive document on childbirth in China’s modern era. Though somewhat delayed, the document holds landmark significance, detailing a comprehensive array of birth support initiatives and emphasizing many positive measures. Since several proposed actions align with our prior recommendations, we will limit our comments to areas requiring particular attention before providing further suggestions.
The second measure proposed by the document is to improve the maternity leave system. The document states, "Localities should improve the maternity leave policy, coordinate funding from multiple channels, establish a reasonable cost-sharing mechanism, strengthen supervision over the implementation of maternity leave, and ensure the enforcement of statutory maternity leave, bonus maternity leave, paternity leave, and childcare leave as stipulated by laws and regulations."
We believe this proposed "establishment of a reasonable cost-sharing mechanism" is particularly important. If the full cost of maternity leave is borne solely by employers, the actual effectiveness will be significantly reduced. Some employers might even try to reduce expenses by avoiding candidates who may have plans to have children, potentially resulting in discrimination against potential parents and adversely impacting the birth rate.
The third measure of the document is to establish birth subsidies and related systems. The document states, "We will develop an implementation plan and management regulations for the birth subsidy system, guide local governments in ensuring policy alignment, and promote steady and active implementation."
Although the mention of birth subsidies is brief, it is particularly noteworthy. To date, birth subsidies have primarily been administered by local governments. However, it is the central government who should take the lead in encouraging childbirth, with birth subsidy policies implemented at the national level over extended periods. This is because the cycle of societal investment in birth incentives and the returns from such policies can only be fully realized across generations and within society as a whole. Furthermore, only the central government has the appropriate policy tools, such as ultra-long-term bonds or credit expansion, while local governments can only play a supporting role.
Regarding the current level of subsidies, we suggest a monthly subsidy of 1,000 yuan [139 U.S. dollars] for each first child, 2,000 yuan [278 U.S. dollars] along with halving social insurance contributions and income tax for each second child, and 3,000 yuan [417 U.S. dollars] per month for each third child and above, with full exemptions from social insurance contributions and income tax. Local governments could increase these amounts to account for regional differences in living costs and income levels. If these birth subsidies were provided from ages 0 to 18, the projected cost would account for approximately 2%-5% of GDP. Future investments should be adjusted in line with changes in birth trends. Given the urgent need to expand domestic demand, a one-time cash bonus of 100,000 yuan [13915 U.S. dollars] per child could also be considered to stimulate consumption and boost confidence.
In our previous article, Birth Welfare Should Become the Cornerstone of Economic Stimulus Policies, we explained the necessity of providing substantial childbirth subsidies. We believe an extremely low birth rate has become a chokepoint for many critical issues in China's economic and social development. Thus, substantial birth subsidies should form the foundation of economic stimulus policies. According to our research, China's socio-economic development and long-term national strength are closely tied to whether the birth rate can soon be raised to a sustainable replacement level. Restoring the birth rate to this level would ensure a promising future for China.
Large-scale cash subsidies for childbirth can stimulate consumption and more fully utilize idle capacity and labor. As China is already a major manufacturing country and the additional consumption from child rearing would likely focus on industries currently experiencing overcapacity—baby formula, clothing, and toys—this would pose minimal inflationary risks. Moreover, moderate inflation is essential for a healthy economy. Providing financial aid to child-rearing families directly injects liquidity into the real economy through household consumption, boosting demand, countering deflation, promoting employment, and raising economic growth expectations. Providing financial support to families with children is an investment in the future.
For a sovereign country with currency issuance rights, subsidies funded through deficit spending effectively translate to borrowing from the central bank, appearing as liabilities on the central bank's balance sheet. This type of domestic debt differs from external debt which requires timely repayment. In the event of severe inflation, the central bank could simply shrink its balance sheet in response.
The tenth measure is to strengthen housing support policies. The document proposes, "We will encourage capable localities to increase support for home purchases by families with multiple children and consider policies such as appropriately raising housing provident fund loan limits according to local circumstances."
We recommend providing housing subsidies for families with children, potentially in the form of mortgage interest rebates. For example, a 50% interest rebate for families with two children and a full interest rebate for families with three or more children, along with the option of reducing or waiving land transfer fees. These housing incentives target families who might otherwise decide against having additional children and therefore will not substantially affect local government revenue.
The thirteenth measure is to strengthen public awareness and education. The document states, "We will implement a special action plan for the promotion and education of high-quality population development. We will fully leverage various media channels to enhance the promotion and explanation of population and birth policies and actively address social concerns. We will strengthen education on national population situation and policies by incorporating relevant content into primary, secondary, and higher education curricula."
Due to the longstanding birth restriction policies, slogans such as "One child is best," "Fewer births, quicker wealth," and "Population control benefits the nation and people" have become deeply ingrained, so much so that when China lost its position as the world's most populous nation, some celebrated it as shedding a "shameful" label. These past slogans all reflect a misguided perception of population as a burden.
The proposal to "strengthen education on national population situation and policies by incorporating relevant content into primary, secondary, and higher education curricula" is an excellent idea. We have made similar recommendations multiple times. However, significant misconceptions about the relationship between population, environment, and development persist in Chinese society, particularly within demographic circles. For example, pseudo-scientific claims like "China is best with 700–800 million people" remain widespread. Therefore, we suggest establishing a specialized expert committee to conduct a comprehensive, in-depth review of various perspectives on population and birth policies, ensuring that updated views are academically rigorous and support sustainable population development.
While this State Council document is highly encouraging, it must be acknowledged that its measures still fall far short of what is needed. Various indicators suggest that China's birth rate faces continued downward pressure. While there may be a slight rebound in births this year, spurred by the release of pent-up demand during the pandemic and by 2024 being the Year of the Dragon [an auspicious year in Chinese culture], the birth rate is expected to continue declining thereafter. To maintain a stable number of births, the birth rate needs to be raised to at least the replacement level of 2.1. Currently, however, the birth rate is around 1.0, which means that with each generation—approximately 30 years—the number of births will shrink by more than half.
If China were to promote childbirth only to the extent proposed in this document, it would be difficult to halt the further decline in birth rates, let alone stabilize them. Nonetheless, this does not diminish the document’s significance; without such encouragement, the birth rate would likely decline even faster. Achieving a replacement-level birth rate will require a gradual, step-by-step approach. While the measures in this document fall short of what is needed, they represent a meaningful step in the right direction. Building on this document, we offer additional suggestions for moving forward.
(1) Establish specific population policy goals.
While, on an individual level, families should have full autonomy over the number and timing of their children, it is reasonable on a macro level for the state to set clear population policy goals to safeguard public interests and ensure sustainable societal development. A suitable policy goal would be to restore the birth rate to above replacement level as soon as possible, thus securing sustainable population growth; and gradually increase and stabilize the "projected population" at over 1 billion, ensuring that the Chinese nation can attain and maintain a population base essential for a globally influential position.
The "projected population" refers to the total population projection when the cohort born this year reaches their life expectancy, assuming parameters that reflect population trends—such as birth rate, replacement level, average age of childbirth, life expectancy, and net immigration—remain at current levels. This metric can serve as a fundamental indicator for monitoring population dynamics and evaluating policy effectiveness. According to estimates from 2023, China's projected population stands at 255 million, making up only 2.03% of the global population. To ensure a future population of no less than 1 billion, the expected population must likewise remain above 1 billion to indicate that policies are effective.
(2) Clarify that birth support policies are not limited to a specific number of children.
To this day, the official wording of China's birth policy still states that "a couple can have up to three children." While there are no actual restrictions or penalties for having four or more children, the "three-child policy" wording still implies that having more than three children is not legally supported. This ambiguity has created significant concerns among some people within the state apprarutus about having four or more children, and there is no consistent interpretation of the policy across local authorities. Moreover, most local government birth support policies stop at three children, meaning that families with a third child receive more benefits than those with a second child, but families with a fourth child receive no additional benefits. This discrepancy—encouraging three children while disadvantaging four—fails to reflect a serious national policy commitment.
The omission of the "three-child policy" in this recent document is a welcome change, but it is recommended that the "three-child policy" be formally abolished and that official documents clarify that birth support policies are not limited by the number of children. Although currently, few families choose to have four or more children, this policy change would send a positive signal to encourage a higher birth rate in China.
(3) Establish a national-level agency to coordinate population development.
Population is a fundamental element of any nation and the basis upon which all public departments and policies depend. An ultra-low birth rate signals a widespread loss of confidence in the future among young people and serves as the most comprehensive indicator of various economic and social issues. Effectively raising the birth rate, therefore, requires structural transformation across society, including changes in mindset, legal frameworks, institutions, incentive mechanisms, and infrastructure, supported by coordinated efforts from all sectors. To this end, it is recommended that a high-level central agency be established at the national level, dedicated to coordinating cross-sector efforts to implement birth support policies.
Earlier this year, South Korea declared a "national population crisis emergency" and announced the creation of a Ministry of Population Strategy and Planning to tackle its low birth rate and aging population. South Korea currently has the lowest birth rate in the world, but China's birth rate has been declining even more rapidly. By 2023, China's birth rate had already fallen below South Korea's rate in 2017.
(4) Maintain redundancy in public services such as childcare and education.
The scarcity of childcare and educational resources is a key factor contributing to China's low birth rate. For a long time, these resources have often been reduced at a rate equal to or faster than the decline in the number of children. This issue is particularly acute in major cities, where—despite China's first-tier cities having some of the world's lowest ratios of school-age children to total population—parents still face severe challenges enrolling their children in schools.
It is recommended that the allocation of childcare and educational resources be aligned with changes in the resident population while maintaining a certain degree of redundancy. This approach can alleviate enrollment pressures in childcare and schools, prevent the challenging of arranging school transportation for children caused by school closures, reduce the pressure on the job market from unemployed teachers, and create favorable conditions for policies that actively encourage childbirth. Experiences in many countries show that small class sizes improve educational quality. China, with its longstanding practice of large class sizes, could have taken proactive steps long ago to reduce class sizes by expanding educational resources. Now, with the rapid decline in the child population, China still has the opportunity to transition to smaller classes involuntarily—provided that it does not rush to proportionally downscale the education system.
(5) Link pensions with birth incentives.
The core issue behind the low birth rate is a misalignment of incentives: the costs of raising children are borne by families and individuals, while the benefits are enjoyed by society as a whole. Before industrialization, grown children provided direct economic support to their parents. However, in the post-industrial era—particularly under a socialized pension system—the economic support younger generations provide to the elderly is primarily distributed at the societal level rather than within individual families. Specifically, the value of pensions for the elderly depends on the goods and services produced by the current working population. The larger the younger generation, the greater the purchasing power of those pensions.
In this sense, parents who raise more children make a greater contribution to the pension system, yet this is not currently recognized in the pension framework. To address this, it is recommended to link pensions to birth incentives. For example, a portion of the pension contributions paid by working individuals could be allocated directly to their own parents. Additionally, parents who raise more children or assist with caring for grandchildren could be eligible for earlier retirement.
(6) Innovate community-based childcare support mechanisms.
Many young people are reluctant to have children not only due to the high opportunity costs of raising them but also because they fear losing social connections and becoming isolated. To address this, a community-based childcare support mechanism is recommended. For example, communities could lead the establishment of childcare co-ops, where interested parents, after receiving training, register to form mutual aid childcare organizations operating under a relatively flexible structure. Parents could choose the amount of time they participate in mutual childcare and earn points based on their contributions. These points could later be exchanged for childcare services, thus alleviating some of the childcare burden on families. The government could provide policy support, such as offering social insurance and other benefits for certain regular positions in the co-ops, helping address practical challenges parents face in childcare. This approach would also offer a platform for parents to exchange childcare experiences and expand their social networks.
Nearly all developed countries today have birth rates below replacement level, and most have not effectively addressed this challenge. However, we believe that if China fully recognizes the necessity of raising the birth rate to replacement level—and the sooner, the better—it could indeed become the first major nation to effectively tackle low birth rates. This potential is grounded not only in China‘s massive production capacity, which provides a solid material foundation for comprehensive pro-birth policies but also in two unique advantages:
First, culturally, China is a society that values ancestral heritage, long-term interests, and collective well-being, placing great importance on honoring parents and maintaining a deep respect for past generations. Additionally, China has a common language and shared cultural customs and values across most of society.
Second, institutionally, China benefits from a strong central government with effective implementation capabilities. Raising the birth rate is a complex, systemic project that requires integrating birth support into all aspects of economic and social life, making a strong central government essential.
It is particularly noteworthy that the final paragraph of the State Council document reads, "All regions and relevant departments must raise their political awareness, heighten their sense of responsibility and mission in carrying out population work in the new era. The primary leaders in each region must personally oversee efforts and assume full responsibility, adhering to and enhancing the target-based responsibility system.” These statements indicate that improving the birth support policy system and fostering a birth-friendly society have been elevated to an unprecedented level of political priority.
While the measures outlined in this document still fall far short of what is needed to solve the low birth rate issue, every significant journey begins with a single step. Now that the most challenging first step has been taken, there is reason to believe that as long as the direction remains clear and the goals well-defined, China can, through steady progress and accumulated experience, ultimately resolve its low birth rate challenge. This will establish a solid demographic foundation for the great rejuvenation of the Chinese nation, ensuring the people's well-being and the country's prosperity.
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