China has implemented a significant policy shift by removing a three-decade-old tax exemption on contraceptive drugs and devices, effective January 1, 2025. The new measure imposes a 13% value-added tax on condoms and contraceptive pills, bringing these products in line with the standard tax rate applied to most consumer goods.

Population Decline Drives Policy Changes

The taxation policy comes as Beijing grapples with persistent demographic challenges in the world's second-largest economy. China's population declined for a third consecutive year in 2024, with experts warning that this downward trend will likely continue. The sustained population decline has prompted government officials to explore various measures aimed at reversing the demographic trajectory.

Comprehensive Fertility Support Measures

Beyond contraceptive taxation, China has implemented several initiatives to encourage childbearing:

The government has also directed colleges and universities to provide educational programs that portray marriage, love, fertility, and family in a positive light as part of broader cultural initiatives.

Government Commitment to Birth Rate Stabilization

Top Chinese leaders reaffirmed their commitment to addressing demographic challenges at the annual Central Economic Work Conference last month. Officials pledged to promote "positive marriage and childbearing attitudes" as a key strategy to stabilize birth rates across the country.

Historical Context and Ongoing Challenges

China's declining birth rates stem from multiple factors spanning several decades. The one-child policy, implemented from 1980 to 2015, significantly impacted demographic patterns, while rapid urbanization further contributed to changing family structures. Contemporary challenges include the high cost of childcare and education, job uncertainty, and broader economic slowdown, all of which have discouraged many young Chinese from marriage and family formation.

The removal of tax exemptions on contraceptives represents a notable shift in policy approach, moving from indirect encouragement of family planning to more direct economic measures aimed at influencing reproductive choices.

Chinese President Xi Jinping has declared that China's economy is positioned to achieve its 5% GDP growth target in 2025, with projections indicating the economy will reach $20 trillion by year-end. Speaking at a new year gathering of the country's top political advisory body, Xi emphasized that this growth rate would continue to rank China high among the world's major economies.

Economic Projections and Targets

According to Xinhua news agency, China's economy is projected to reach $20 trillion in 2025, marking the conclusion of the 14th five-year plan. Xi called for national unity to navigate what he described as "high winds, choppy waters, and even dangerous storms" in the economic landscape ahead.

Manufacturing Sector Recovery

China's factory activity demonstrated signs of recovery in December, with key manufacturing indicators showing improvement. The official purchasing managers' index provided encouraging signals for the sector's performance.

The December reading moved above the critical 50-point threshold that separates growth from contraction, driven by pre-holiday orders after the manufacturing sector had experienced decline for eight consecutive months.

Economic Challenges and Performance

Despite manufacturing improvements, China faces mixed economic indicators across different sectors. Bloomberg reports highlight both strengths and areas of concern in the country's economic performance.

Key Economic Trends:

• Booming exports helped maintain overall growth trajectory
• Investment tracking toward first yearly decline since 1998
• Retail sales growth at weakest levels outside pandemic period
• Government measures targeting consumer spending enhancement

Policy Focus and Future Plans

The government has been actively implementing measures to stimulate economic activity across multiple fronts. These initiatives target both domestic consumption and international engagement to support sustained growth.

Government Priority Areas:

• Driving consumer spending from domestic population
• Attracting tourists and international students
• Increasing foreign investment inflows
• Promoting technological self-reliance

These priorities will continue into the 15th five-year plan, where the government aims to raise personal incomes and reduce the "precautionary savings" habit among citizens. The comprehensive approach reflects China's strategy to balance immediate economic needs with long-term structural improvements in consumption patterns and investment flows.