Chinese citizens will face a 13% sales tax on contraceptives starting January 1, while childcare services will be exempt from value added tax (VAT), as the country grapples with declining birth rates and an aging population. The tax overhaul, announced late last year, rescinds exemptions in place since 1994, a period when China enforced its one-child policy, according to Osmond Chia, business reporter, and Yan Chen, BBC News Chinese. The move is part of a broader effort by Beijing to encourage marriage and childbirth, including VAT exemptions for marriage-related services and elderly care, extended parental leave, and cash handouts.

Official figures indicate a continued population decline, with 9.54 million births recorded in 2024, approximately half the number from a decade prior when China began relaxing its child policy. The new tax applies to contraceptives including condoms, birth control pills, and other devices.

The policy shift comes as China's economy faces challenges related to its demographic shift. The National Bureau of Statistics reported that China's population has shrunk for three consecutive years. The declining birth rate poses a long-term threat to the labor force and economic growth.

The removal of the VAT exemption on contraceptives has raised concerns about unintended consequences, particularly among lower-income individuals. Some analysts suggest the tax could disproportionately affect access to family planning resources. The impact on the contraceptive market and related companies remains to be seen. The government has not yet released detailed projections on the expected revenue from the tax or the anticipated impact on birth rates.