Tax on Contraceptives Will Not Encourage Fertility

Once the world’s most populous nation, China is now among the many Asian countries struggling with anemic fertility rates. In an attempt to double the country’s rate of 1.0 children per woman, Beijing is reaching for a new tool: taxes on condoms, birth control pills and other contraceptives.

As of Jan. 1, such items were subject to a 13% value-added tax. Meanwhile, services such as child care and matchmaking remain duty-free.

The move comes after China last year allocated 90 billion yuan (US$12.7 billion) for a national child care program giving families a one-off payment of around 3,600 yuan (over $500) for every child age three or under.

I have studied China’s demography for almost 40 years and know that past attempts by the country’s communist government to reverse slumping fertility rates through policies encouraging couples to have more children have not worked. I do not expect these new moves to have much, if any, effect on reversing the fertility rate decline to one of the world’s lowest and far below the 2.1 “replacement rate” needed to maintain a stable population.

In many ways, the 13% tax on contraceptives is symbolic. A packet of condoms costs about 50 yuan (about $7), and a month supply of birth control pills averages around 130 yuan ($19). The new tax is not at all a major expense, adding just a few dollars a month.

Compare that to the average cost of raising a child in China – estimated at around 538,000 yuan (over $77,000) to age 18, with the cost in urban areas much higher. One 36-year-old father told the BBC he is not concerned over the price hike. “A box of condoms might cost an extra five yuan, maybe 10, at most 20. Over a year, that’s just a few hundred yuan, completely affordable,” he said.

Pronatalist failings

China is one of many countries to adopt pronatalist policies to address low fertility. But they are rarely effective.

The Singapore government has been concerned about the country’s very low fertility rate for a couple of decades. It tried to devise ways to boost it through programs such as paid maternity leave, child care subsidies, tax relief and one-time cash gifts. Yet, Singapore’s fertility rate – currently at 1.2 – remains one of the lowest in the world.

The government there even started limiting the construction of small, one-bedroom apartments in a bid to encourage more “family-friendly” homes of two bedrooms or more – anyone with children will appreciate the need for more space, right? Yet even that failed to budge the low fertility rate.

The Singaporean government got a helping hand in 2012 from candymaker Mentos. In a viral ad campaign, the brand called on citizens to celebrate “National Night” with some marital boom-boom as they “let their patriotism explode” – with a hoped-for corresponding burst in births in nine months’ time. Even with the assistance from the private sector, it appears, reversing declining fertility rates is a tricky thing.

South Korea, the country with the world’s lowest fertility rate – 0.7 – has been providing financial incentives to couples for at least 20 years to encourage them to have more children.

It boosted the monthly allowance already in place for married couples to become parents. In fact, since 2006 the South Korean government has spent well over $200 billion on programs to increase the Korean birth rate.

But South Korea’s fertility rate has continued to drop from 1.1 in 2006 to 1.0 in 2017, to 0.9 in 2019, to 0.7 in 2024.

Unfavorable headwinds

The plight of China is partly of its own doing. For a couple of decades the country’s one-child policy pushed to get fertility rates down. It worked, going from over 7.0 in the early 1960s to 1.5 in 2015.

That is when the government again stepped in, abandoning the one-child policy and permitting all couples to have two children. In May 2021, the two-child policy was abandoned in favor of a three-child policy.

The hope was that these changes would lead to a baby boom, resulting in sizable increases in the national fertility rate. However, the fertility rate continued to decline – to 1.2 in 2021 and 1.0 in 2024.

While China’s historic programs to push down fertility rates were successful, they were aided by wider societal changes: The policies were in force while China was modernizing and moving toward becoming an industrial and urbanized society.

It’s policies aimed at increasing the birth rate now find unfavorable societal headwinds. Modernization has led to better educational and work opportunities for women – a factor pushing many to put off having children.

In fact, most of China’s fertility reduction, especially since the 1990s, has been voluntary – more a result of modernization than fertility-control policies. Chinese couples are having fewer children due to higher living costs and educational expenses involved in having more than one child.

Plus, China is one of the world’s most expensive countries in which to raise a child, when compared to average income. School fees at all levels are higher than in many other countries.

The ‘low-fertility’ trap

Another factor to take into consideration is what demographers refer to as the “low-fertility trap.” This hypothesis, advanced by demographers in the 2000s, holds that once a country’s fertility rate drops below 1.5 or 1.4 – far higher than China’s now stands – it is very difficult to increase it by 0.3 or more.

The argument goes that fertility declines to these low levels are largely the result of changes in living standards and increasing opportunities for women.

Accordingly, it is most unlikely that China’s three-child policy will have any influence at all on raising the fertility rate. And all my years of studying China’s demographic trends lead me to believe that making contraceptives marginally more expensive will also have very little effect.