China is implementing its largest-ever initiative to increase the country’s declining birth rate by offering all parents national child allowances. Each child under three years old entitles parents to approximately €500 annually in state support.

The Chinese government presented a comprehensive reform on Monday where parents will annually receive about $500 per child under three years old, equivalent to approximately €500. The decision comes as a direct response to the country’s serious demographic crisis where the population has declined for three consecutive years, reports AFP according to France 24.

According to UN population projections, China risks seeing its population drop from today’s 1.4 billion inhabitants to 800 million by 2100. Last year, only 9.54 million children were born in the country – half as many as in 2016, the year when the controversial one-child policy was abolished after more than three decades.

“This is a major nationwide policy aimed at improving public wellbeing”, reported the state television channel CCTV. The support applies retroactively from January 1 this year and is based on a decision from the ruling Communist Party and the State Council.

Parents welcome initiative but want more

In Beijing, parents have received the news positively, but many believe significantly more is needed for them to consider having more children.

— For young couples who just got married and already have a baby, it might actually encourage them to consider having a second child, says Wang Xue, who is mother to a nine-year-old son.

— The subsidy does help ease their burdens… and also offers some psychological comfort, Wang continues.

The 36-year-old mother emphasizes, however, that the new measures are not enough to convince her to have another child.

— Having one child is manageable, but if I had two, I might feel a bit of financial pressure, she says.

Zhang Wei, a 34-year-old father of a daughter and a son, calls the new allowances “a good start” as the costs of raising children continue to rise.

— Compared to our generation, the costs have definitely increased exponentially, he notes.

Analysts: Right direction but insufficient

Economic experts believe the allowances are a step in the right direction but warn that the measures alone will not reverse population decline or stimulate domestic consumption.

— It is encouraging that the government finally moved to use fiscal subsidies to boost fertility, says Zhiwei Zhang, CEO and chief economist at Pinpoint Asset Management.

Zichun Huang, China economist at Capital Economics, describes the policy as a “major milestone” regarding direct payments to households and believes it could lay the foundation for more tax transfers in the future. He notes, however, that the amounts are too small to have “any short-term impact on birth rates or consumption.”

Local initiatives already in place

Many local authorities have already introduced their own child allowances to encourage childbearing. In March, Hohhot, the capital of Inner Mongolia, began offering residents up to 100,000 yuan (€12,000) per newborn child for couples with three or more children. First and second children entitle parents to 10,000 and 50,000 yuan in allowances respectively.

In Shenyang, in northeastern Liaoning province, families who have a third child receive 500 yuan per month until the child turns three. More than 20 provincial authorities now offer various forms of child allowances according to official statistics.

Prime Minister Li Qiang promised to provide national child allowances during the government’s annual work report in March.

Aging population creates concern

China’s shrinking population is also aging rapidly, raising concerns about the country’s future pension system. In 2024, there were nearly 310 million inhabitants who were 60 years or older.

The country also lost its position as the world’s most populous nation to India in 2023, after the population decreased by 1.39 million last year. Low marriage rates and young couples’ concerns about high child-rearing costs and career impact contribute to the continued decline in the number of births.