Amid historically low birth rates and economic pressures from its aging population, China will eliminate a decades-old tax exemption on contraceptives.

China aims to impose a unique strategy to address a falling birth rate that threatens its long-term stability. As of January 1, 2026, the government will levy a 13 percent value-added tax (VAT) on various contraceptives, including condoms.

The decision amends the Value Added Tax Law, which in 1993 exempted birth control products from taxation. At the time, the measure was part of China’s effort to contain its accelerating population growth. However, that policy has become a hindrance to the world's second-largest economy, whose growth and stability are under pressure due to its markedly aging population and declining birth rate.

The National Bureau of Statistics reported that in 2024 China recorded a slight uptick with the birth of 9.54 million babies, around 520,000 more than in 2023. However, the birth rate per 1,000 stood at 6.77 last year, matching the second-lowest level observed in the history of the People's Republic of China, in 2022. The lowest rate was in 2023 at 6.39 per 1,000.

The country’s total population has been declining steadily for the past three years. In 2024, there were just over 1.408 billion inhabitants, representing a year-on-year decline of 1.39 million. In April 2023, India overtook China as the world's most populous country.

Specialists warn that this trend will have a profound effect on the economy of America's main rival. A report by Oxford Economics notes that potential output growth (an indicator measuring the maximum expansion that can be achieved without generating inflationary pressure) could fall below 4 percent in the 2030s due to a shrinking labor force and a slowdown in productivity.

Since 2021, Chinese authorities have launched various initiatives to reverse population decline. These include what they call “the new culture of marriage and motherhood,” a policy that supports families with a mother, a father and three children by granting subsidies for each birth. It also expands childcare services and extends paternity and maternity leave. In addition, the country discourages abortions by classifying the procedure as nonessential treatment.

Despite these efforts, experts believe China’s chances of reversing its low birth rate are slim, especially since it is one of the most expensive countries in which to raise children. According to a 2024 analysis by the YuWa Population Research Institute, the average cost of raising a child to the age of 18 is around 538,000 yen (about $76,000).

In this context, demographer He Yafu explained in statements quoted in Bloomberg that “the elimination of the VAT exemption is largely a symbolic effort and is unlikely to generate a significant impact on a national scale.”