Commentary: China Can Afford the Ultimate Stimulus — A Baby Boom

1. In January 2025, China’s National Bureau of Statistics reported that the number of births in 2025 dropped to 7.92 million, 1.62 million fewer than the previous year. The birth rate fell to 5.63 per 1,000 people, and the fertility rate dropped below 1.0, signaling an unusually rapid population decline that outpaces the global downward trend in birth rates. This decline is seen as requiring an unprecedented response to avoid severe demographic and economic consequences. [para. 1]

2. Starting in 2025, China introduced a nationwide childcare subsidy of 3,600 yuan ($518) per year for each child under age three. Finance Minister Lan Foan stated the total fiscal arrangement for this subsidy is about 100 billion yuan, only about 0.07% of China’s 140 trillion yuan GDP. In comparison, countries like France and those in the Nordics dedicate more than 3% of GDP to family welfare, correlating with their higher fertility rates. Experts argue China's current effort is insufficient and that substantially greater support is necessary to address the issue effectively. [para. 2]

3. It is suggested that China can and should allocate up to 4 trillion yuan annually to robust fertility subsidies. For China’s vast economy and production capacity, this amount is feasible and essential for reversing demographic decline. [para. 3]

4. To meaningfully alter family economics and encourage higher birth rates, a tiered cash handout system is proposed: 1,000 yuan per month for a first child, 3,000 yuan for a second, and 5,000 yuan for a third or subsequent child, until the child turns 18. Considering the typical distribution of family sizes, this averages 24,000 yuan per child annually. With an annual birth cohort of 10 million, this policy would ultimately cost 4.32 trillion yuan each year, or about 3.1% of China’s 2025 GDP. [para. 4]

5. Critics of such large expenditures often question the funding source. The article advocates for using long-term sovereign bonds. These funds are framed as investments in human capital, creating future workers and taxpayers, rather than as a simple social expenditure. The logic is that supporting families now yields significant economic returns in the long term. [para. 5]

6. China's economic structure makes it uniquely capable of increasing household subsidies without sparking inflation. Its manufacturing sector represents 30% of global value-added output despite only 17% of the world’s population, and its 2025 trade surplus reached $1 trillion, showing that domestic demand is well below available supply. [para. 6]

7. Currently, China is grappling with overcapacity, underemployment, and deflation – with housing prices falling for four years straight. A substantial fiscal injection to families would directly stimulate demand for various goods and services, from infant care products to housing and tourism, helping absorb the country’s excess industrial capacity and create jobs, thus establishing a virtuous economic cycle. [para. 7]

8. China’s national investment rate is about 40%, much higher than the global average of 23-27%. Much of this is in physical infrastructure, which now sees diminishing returns. The article asserts that a shift is needed toward investment in human capital — cultivating the next generation is now the most productive and prudent way to ensure national prosperity, as further physical infrastructure growth is pointless without people to use it. [para. 8]

9. Unlike Japan and South Korea, which have struggled to raise fertility rates, China’s vast manufacturing abilities, deep-rooted family values, and political system allow for massive, rapid policy shifts. These offer China a unique opportunity to succeed in boosting births if policies are bold enough. [para. 9]

10. The article concludes by asserting the urgency of pivoting from investing in material assets to investing heavily in people. A 4 trillion yuan commitment would address intergenerational equity, become a transformative economic stimulus, and secure China’s future by providing for its youth, leveraging its extensive resources for national rejuvenation. [para. 10]

11. Liang Jianzhang, a co-founder of Trip.com Group and professor at Peking University, authored the piece, which reflects his own views rather than those of Caixin. [para. 11][para. 12]