China launches $500 annual childcare subsidy to combat falling birth rate

Srinagar, July 29: China has introduced a nationwide childcare subsidy of 3,600 yuan (around $500) per year for each child under the age of three, starting this year. The move is part of broader efforts to address the country’s declining birth rate and shrinking population.
The policy, announced Monday, will offer full subsidies for children born in or after 2025, with partial support for those born earlier, according to state news agency Xinhua. More than 20 million families are expected to benefit.

The National Health Commission called it an “important national livelihood policy,” noting that direct financial support would help ease the burden of child-rearing and encourage family growth. 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.

However, many demographers and economists remain skeptical about its immediate impact. They argue that the subsidy amount is too small to change the minds of young Chinese hesitant to have children due to high childcare and education costs, job insecurity, and a sluggish economy. China’s population declined for the third straight year in 2024, following decades of low birth rates linked to the one-child policy (in effect from 1980 to 2015) and rapid urbanisation.
Previously, local governments across China had introduced various incentives, ranging from 1,000 yuan to as much as 100,000 yuan per child, including housing benefits. The new program, however, will be centrally funded—marking a shift in responsibility from local to national authorities.

Economists note the policy’s significance more as a signal of future household support than a game-changer for demographics. Citi Research estimates that total payouts from the program will amount to 117 billion yuan in the second half of 2025, describing it as more impactful as an economic stimulus than a population strategy.

The subsidy applies equally to first, second, or third children born on or after January 1, 2025. Children born prior to that date but still under three will receive a prorated amount based on the months remaining. The policy is expected to benefit more than 20 million families of toddlers and infants.

Maximum Benefit per Child: Up to 10,800 yuan total over three years.
Coverage Estimate: The scheme is expected to benefit more than 20 million families with children under three each year.
Tax & Social Benefits: Subsidies are exempt from individual income tax, and the payments will not count toward household or personal income for purposes such as minimum living allowances.