From January 1, people in China will be charged a 13% sales tax on contraceptives, even as childcare services are made tax-free, in a bid by the world’s second-largest economy to arrest its falling birth rates.
Kicking off 2026 with a policy move that has left many puzzled,
China has imposed a 13% value-added tax (VAT) on condoms and other contraceptives, ending a tax-exempt status that had been in place for more than three decades.
The decision comes at a time when the country is grappling with one of its lowest birth rates on record.
Contraceptives had been exempt from VAT since the early 1990s, a period shaped by China’s strict family-planning regime. Back then, keeping condoms and birth control affordable was a deliberate policy choice, as the state was actively enforcing the one-child policy and discouraging larger families.
Fast forward to today, and the demographic challenge has flipped completely.
Births are falling sharply, the population has declined for three consecutive years, and Beijing is urgently trying to persuade couples to start families. To that end, authorities have rolled out a series of incentives, including childcare tax breaks, cash handouts and longer parental leave.
The ‘Free Birth’ strategy and direct subsidies
As part of this push, the government has introduced a “Free Birth” strategy aimed at removing the upfront financial shock of childbirth. Under the plan, standard delivery and prenatal care costs are to be fully covered by the national medical insurance system.
This is being paired with the first nationwide cash support scheme, offering families an annual subsidy of 3,600 yuan (approximately $515) per child for the first three years.
Even so, skepticism remains widespread. Many young couples argue that while such measures may ease initial expenses, they do little to address the far larger, long-term burden of education costs, housing pressures and the demands of China’s gruelling “996” work culture.
Automation as the new demographic dividend
At the same time, Beijing is hedging its bets against a shrinking workforce by doubling down on automation. With the working-age population contracting by millions each year, China is pushing to become a global leader in “embodied AI” and humanoid robotics.
The goal is to scale up commercial use in factories, logistics and even elderly care by the end of 2026, reducing reliance on human labour as demographic pressures intensify.
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