PBoC to speed up drawing long-term plan to boost consumption

PBoC to speed up drawing long-term plan to boost consumption

In a significant step toward addressing the country’s declining birthrate and rising childcare costs, China has introduced its first-ever national childcare subsidy implementation plan. Announced on July 28, 2025, the policy establishes a unified annual cash subsidy of RMB 3,600 (US$496) per child under the age of three—regardless of birth order—marking a new phase in China’s approach to population and social policy [1].

The subsidy, set to take effect retroactively from January 1, 2025, is available to children under the age of three who are born in accordance with Chinese laws and regulations and hold Chinese nationality. This means all legally born first-, second-, or third-born children under three years old can qualify, regardless of family size. The national baseline subsidy is RMB 3,600 (US$496) per child per year, disbursed annually until the child turns three. For children born before January 1, 2025, but not yet three years old, the subsidy will be prorated based on the number of eligible months remaining until their third birthday [1].

The application process involves submitting specific information online or offline through designated government portals. The subsidy enjoys several favorable tax and income treatment benefits, such as being exempt from individual income tax and excluded from income calculations for public assistance programs [1].

The introduction of this policy reflects a strategic pivot in China’s approach to fertility governance. While the annual subsidy alone is unlikely to cause a dramatic rebound in birth rates, it plays a crucial role in stabilizing fertility expectations and mitigating further declines. The policy serves as a foundational “floor effect” — easing economic burdens for young families, especially in lower-income regions. This helps prevent more households from opting out of parenthood entirely, which researchers identify as a crucial stabilizing force in low-fertility societies [1].

The policy also signals a shift from fragmented local pilot programs to a standardized, centrally coordinated benefit structure. This unified administrative and fiscal design allows for future adjustments in coverage and benefit levels, depending on effectiveness and available resources. Experts view this as a move from fragmented local pilots toward a scalable national solution [1].

Beyond its demographic goals, China’s national childcare subsidy is poised to deliver meaningful economic stimulus, especially in the realm of household consumption. By injecting around RMB 100 billion (US$13.8 billion) annually into households with young children, the policy provides direct liquidity to families with the highest marginal propensity to consume. This targeted demand can boost the maternal and childcare industries, generating ripple effects across upstream and downstream supply chains [1].

The most immediate beneficiaries of this policy are producers of infant staples, maternal and infant retail platforms, childcare services, and assisted reproductive services. The subsidy effectively boosts families’ purchasing power, enabling greater spending or an upgrade in product quality. Scalable, compliant operators offering reliable care at accessible prices will be best positioned to capture this increased demand [1].

While China’s national childcare subsidy policy opens new market opportunities, foreign-invested enterprises (FIEs) and global brands targeting Chinese families must navigate several challenges that could affect business outcomes. Uncertain fertility response, regulatory compliance, and competition from local firms are some of the key challenges [1].

In conclusion, China’s national childcare subsidy marks a significant step in optimizing its pension, childcare, and healthcare service systems. The policy aims to stabilize fertility rates, boost consumption, and create a more inclusive public spending approach. The long-term success of this policy will depend on its ability to integrate with other complementary reforms in childcare services, education, housing, and parental leave.

References:
[1] https://insights.made-in-china.com/China-Launches-First-Ever-National-Childcare-Subsidy-What-You-Must-Know_VTIGdfuWanlN.html