China Imposes 13% VAT on Contraceptives to Combat Declining Birth Rates: What You Need to Know

China has implemented a new strategy to address its declining birth rate crisis.

Condom prices in China are expected to rise following the government's decision to impose a 13% value-added tax (VAT) on contraceptive products. This marks the first time since 1993 that contraceptives will not be exempt from taxation, as part of Beijing's efforts to reverse falling birth rates.

For the past three decades, these products had enjoyed VAT exemption during China's strict one-child policy era when birth control was actively promoted.

According to He Yafu, a demographer with Beijing's YuWa Population Research Institute, "Removing the VAT exemption is largely symbolic and unlikely to have much impact on the bigger picture." He noted, however, that the measure aims to create a social environment that encourages childbirth while reducing abortions.

This tax policy change comes at a concerning time when HIV cases are increasing in China. Data from the Chinese Centre for Disease Control and Prevention shows HIV/AIDS cases have risen dramatically from 0.37 per 100,000 people in 2002 to 8.41 per 100,000 by 2021.

China abandoned its one-child policy in 2016 and later permitted up to three children per family in 2021. Despite these changes, the country has experienced three consecutive years of population decline. United Nations demographic projections suggest China's population could decrease from its current 1.4 billion to approximately 800 million by 2100. Last year, China recorded just 9.54 million births, half the number reported in 2016 when the one-child policy ended.

While previous policies restricted family size, the substantial cost of raising children has discouraged many young Chinese couples from having children. Reports indicate that raising a child to age 18 in China costs an average of 538,000 yuan (approximately Rs 65.7 lakh), with expenses in major cities like Shanghai and Beijing potentially exceeding 1 million yuan.

In July, state media announced that the government would offer subsidies of $500 per year for each child under three years of age.