Commentary: China Should Issue Long-Term Bonds to Boost Child-Rearing Subsidies

China's birth rate has dramatically declined, reaching about half the replacement level. In 2016, there were 18.83 million births, but by 2024 this had fallen to 9.54 million, with further decreases expected in 2025. This birth dearth is expected to hasten the aging of the population, lowering the ratio of working-age individuals to retirees, which in turn increases social welfare costs and tax burdens on the workforce while reducing national innovation potential. A smaller, older population means fewer innovators and decreased creativity for society overall.[para. 1][para. 2]

The root cause of low fertility in China is a mismatch between who bears the costs and who enjoys the benefits: families shoulder the primary expenses (in money, time, and energy) to raise children, while the state and society gain the longer-term benefits of a larger workforce, consumer base, and tax revenues. The author argues that this misalignment should be corrected with significant social compensation to families raising children.[para. 3]

On July 28, Beijing introduced a national childcare subsidy program, providing families with a 3,600-yuan (approximately $500) annual subsidy per child under the age of three, effective January 1, 2025. While hailed as a positive move towards a broader fertility-welfare system, the author notes that the sum is minor compared to the actual cost of child-rearing and that China’s support lags far behind that of European countries. For example, France, Sweden, and Norway spend more than 3% of GDP on family welfare, with French families receiving up to 900 euros ($960) a month for three children until they turn 18, which is a key factor in their higher fertility rates.[para. 4][para. 5]

The author proposes raising Chinese childcare subsidies significantly and suggests funding this through long-term government bonds. Specifically, monthly subsidies of 1,000 yuan for the first child, 2,000 yuan for a second, and 3,000 yuan for further children, all continuing until age 18, with adjustments tied to economic conditions and birth rates.[para. 6]

A rough calculation demonstrates the government’s potential return: with a 1,500 yuan average monthly stipend, the total subsidy over 18 years comes to 324,000 yuan per child. Yet, an average university graduate working 40 years is estimated to contribute 1.8-3.2 million yuan in taxes and social security, vastly exceeding the original subsidy outlay.[para. 7][para. 8][para. 9]

Cash handouts to families are seen not as a pure cost but as compensation for creating future taxpayers, a fairer approach acknowledging the social value of child-rearing. Fears that this would encourage laziness are dismissed, noting that subsidies barely cover direct costs and ignore the career sacrifices parents, especially mothers, make.[para. 10][para. 11]

Inflation concerns are also dismissed due to China’s current deflationary pressures and excess production capacity. Instead, increased family cash support could help counteract deflation and generate new consumer demand, particularly by supporting families with children who spend more, stimulating economic growth and boosting fiscal revenues.[para. 12][para. 13][para. 14]

The author recommends creating a national childcare fund, financed by long-term (approximately 30-year) government bonds. This would align the funding period with a generation and distribute the costs across current and future taxpayers, especially those who would benefit most from an expanded population and tax base.[para. 15]

In sum, the article argues that investing in children yields societal returns far greater than the initial costs, and is crucial for China’s long-term innovation, fiscal health, and comprehensive national strength. Larger childcare subsidies would also have immediate macroeconomic benefits by boosting consumption and alleviating deflation.[para. 16]