In Depth: Why China’s Piecemeal Child Subsidy Policy Failed to Deliver

In 2021, the city of Panzhihua in Sichuan province, China, initiated a monthly subsidy of 500 yuan ($69) for families having a second or third child. This scheme was designed to last until the children turned three years old. This marked the first instance of a Chinese local government offering financial incentives to encourage larger families. [para. 1][para. 2]

Following Panzhihua's initiative, various cities in 23 provinces started implementing similar child subsidy programs within a framework built by the central government. This effort came in anticipation of the country's population decline in 2022, a first in 60 years. Nevertheless, despite these efforts, birth rates continued to drop in urban areas like Panzhihua. As of now, the central government is developing a national birth subsidy system to address the shortcomings of the fragmented local policies. [para. 3][para. 4][para. 5]

One major issue with the current local policies is the inconsistency in subsidy amounts and distribution methods, which vary greatly by region. Many migrant families find themselves excluded from these programs due to residency requirements.[para. 6][para. 7] The effectiveness of child subsidies in countries with longstanding programs is mixed, and China's situation is facing similar complexities. Experts indicate that the diminishing birth rate could have detrimental effects on China's long-term economic growth, potentially resulting in slower productivity, reduced domestic demand, and strain on government budgets. [para. 8][para. 9]

Investments in child subsidies in China have varied across regions. Larger cities like Hangzhou, Zhejiang, offer one-time subsidies, whereas smaller regions may provide ongoing installments. However, families often face hurdles, such as not qualifying due to lack of residency status or local social security contributions. [para. 10][para. 11][para. 12][para. 13]

An underlying issue complicating the effectiveness of these subsidies is the lack of accessibility for transient or non-resident families, such as migrant workers or students like Wu Xin, who must navigate different policies across cities. Eligibility often requires residency and contributions to local social security systems, making it difficult for such families to benefit. [para. 14][para. 15][para. 16]

According to some researchers, the low birth rate is not solely a result of insufficient subsidies but also stems from broader demographic trends, including fewer women of childbearing age and evolving societal attitudes toward childbirth. These ongoing challenges showcase the limitations of subsidies, given the high personal and career costs associated with raising children. [para. 17]

Globally, many countries including those in Europe and North America have long employed child subsidies with varying success. In East Asian regions including China, however, lower GDP allocations toward family welfare have been linked to lower birth rates. [para. 18][para. 19] Comparatively, European nations spend a higher percentage of their GDP on family welfare, which has shown positive, albeit limited, impacts on birth rates. [para. 20]

China's recent policy measures announced by the State Council aim to integrate and enhance family support systems, advocating for improved parental leave and expanded benefits for diverse forms of employment. These measures imply a comprehensive approach to better support families and mitigate economic pressures on them. [para. 21][para. 22][para. 23] The expansion of parental leave is particularly critical, as placing the financial burden on employers could lead to discriminatory hiring practices. Therefore, the government's involvement in cost-sharing is crucial for the success of these initiatives. [para. 24]

Finally, expanding maternity insurance to include gig workers and migrant laborers is deemed a progressive advancement that aligns with the changing dynamics of the workforce. This inclusion not only aids in providing necessary security to more workers but also acknowledges the evolving nature of employment today. [para. 25][para. 26]