China will remove the VAT exemption on condoms for the first time in more than 30 years, a move aimed at encouraging higher birth rates amid a shrinking workforce and an ageing population.
The legislation, approved on 25 December 2024, updates China’s list of tax-exempt goods and services, which includes areas such as agriculture, medical care, and cultural activities. Birth control products, however, were excluded, meaning condoms will now be subject to a 13% value-added tax. The law will come into effect on 1 January 2026, giving businesses and local authorities time to adjust accounting systems.
The change marks a significant policy shift following decades of strict family planning measures, including the one-child policy enforced between 1979 and 2015. During that period, the government promoted the widespread use of contraception and sterilisation to limit population growth, citing concerns over resources and social stability. These measures succeeded in lowering birth rates but left long-term demographic challenges, including a rapidly ageing population, a shrinking workforce, and a skewed gender ratio due to a cultural preference for male children.
China’s birth rate stood at 6.77 births per 1,000 people in 2024, while the fertility rate in 2023 was about 1, roughly half the 2.1 children per woman needed to maintain the population. Experts warn that a continued decline in the working-age population could hinder China’s long-term economic growth and strain social support systems, threatening the sustainability of the nation’s healthcare and pension systems.
China’s economic rise over the past four decades relied heavily on a large, youthful labour force that powered manufacturing, infrastructure development, and export-driven growth. Without enough young workers, analysts caution that maintaining this level of growth could prove difficult.
Critics have raised concerns over potential public health consequences of the new tax, warning it could limit access to contraception and increase the risk of sexually transmitted infections. Others argue that higher birth rates are unlikely to follow, given the high cost of raising children in China. According to the YuWa Population Research Institute, the average cost of raising a child to age 18 is approximately 538,000 yuan (€65,484), placing China among the most expensive countries for parents.
The policy reflects Beijing’s urgent focus on demographic issues and long-term economic sustainability, but it may do little to address broader social and financial barriers that discourage couples from having children. As the nation prepares for the tax change, both businesses and families face the challenge of adapting to a policy landscape that increasingly prioritises population growth over contraception affordability.
