Liang Jianzhang: Cash Subsidies for Childbirth Are Effective, but the Scale Must Be Sufficient (AI Translation)

梁建章：发钱补贴生育有效，但力度要够大

On July 28, 2025, China published the implementation plan for the National Child-Rearing Subsidy System, effective from January 1, 2025. Under this program, families are eligible to receive an annual subsidy of 3,600 RMB per child—irrespective of whether the child is the first, second, or third—for each year until the child reaches three years of age. This marks the central government's direct involvement as the primary provider of child-rearing subsidies, with local governments offering additional support where possible. The move is considered necessary as most local governments lack the fiscal capacity to support birth incentives at a meaningful scale, and population mobility challenges the logic of local funding since the benefits of higher birth rates may not be realized locally. Centralizing the subsidy ensures more equitable and effective support nationwide [para. 1][para. 2].

The recently announced national child-rearing subsidy signals the start of more comprehensive family benefits. Nevertheless, the current subsidy—3,600 RMB per year (equivalent to 300 RMB per month) for up to three years per child—totals 10,800 RMB per child. Given the high costs of raising children in China (averaging 538,000 RMB for ages 0-17), this amount covers only about 2% of total costs. The policy also currently excludes families with four or more children. Rough estimates suggest that, assuming an annual birth rate of 10 million, subsidies for new births would require 3.6 billion RMB, while covering all children under three would cost approximately 100 billion RMB annually. [para. 3][para. 4][para. 5]

In light of these figures, experts propose a more robust policy: monthly payments of 1,000/2,000/3,000 RMB for first, second, and third or more children, respectively (until age 16 or 18), substantial tax and social insurance reductions for families with two or more children, and mortgage interest subsidies based on family size. Total outlays could reach 2%-5% of GDP—amounting to trillions of RMB annually. Although substantial, proponents argue this is vital to boost birth rates to replacement level [para. 6][para. 7].

Concerns about inflation are addressed by noting that China's current economy faces both overcapacity and insufficient demand, with deflation (falling prices), not inflation, as the immediate challenge. Large-scale subsidies would boost short-term demand for baby and child products and, in the long term, stimulate a range of industries, improve employment, and absorb overcapacity. Increased population also enhances China's innovation and global competitiveness [para. 8].

China faces an urgent demographic challenge, with annual births declining from 18.83 million in 2016 to 9.02 million in 2023. This decline is sharper than Japan’s, which took 41 years for births to halve. Despite a short-term rise in 2024, demographic forecasts predict continued decline due to fewer women of childbearing age, lower marriage rates, and low fertility intentions. In 2023, China’s total fertility rate was only 1.01—well below replacement level. The elderly make up over a quarter of the world’s senior population, while Chinese births account for less than 7% of global totals. The imbalance threatens pension burdens, tax increases, and economic stagnation [para. 9][para. 10][para. 11].

International and local experiences—such as South Korea’s fertility rebound following significant monetary incentives, and regional cases in China where generous birth subsidies have reversed declining birth trends—suggest that financial incentives are effective when sufficiently large. However, subsidies must be part of a broader policy suite, including free preschool education and social support, to create a genuinely pro-family environment, with child-rearing investments seen as pivotal to China’s economic and demographic revitalization [para. 12][para. 13][para. 14][para. 15][para. 16][para. 17][para. 18][para. 19][para. 20].