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For the first time in more than three decades, condoms will no longer enjoy VAT-exempt status in China as a new law seeks to boost birth rates.
The legislation, approved on 25 December 2024, sets out a revised list of tax-exempt goods and services, which cover areas such as agriculture, medical treatments, and cultural activities — but it notably omits birth control products such as condoms.
These items will now be subject to a 13% levy, signalling a policy U-turn after years of strict family planning laws in China, designed to limit population growth.
Although the new VAT law was adopted in December of last year, it will not take effect until 1 January 2026, which is the usual lead-in period for major tax reforms. This grants local authorities and businesses a full year to update accounting systems and ensure an orderly transition.
China’s decision sits against the backdrop of a rapidly worsening demographic picture.
The birth rate has steadily declined for decades, hastened by the one-child policy that lasted from 1979 to 2015, with an average of 6.77 births per 1,000 people in 2024.
The policy restricted most families to a single child through a system of fines, registration limits, and workplace enforcement. The state promoted widespread use of contraception and sterilisation out of concern that limited resources could not keep pace with rising births.
The approach was also part of a broader belief that strict population control was essential for economic modernisation and social stability.
While births were reduced, it left lasting demographic pressures, including a shrinking workforce, a rapidly ageing population, and a gender imbalance. Due to a preference for male children, the country’s overall sex ratio became skewed toward males as baby girls were abandoned or even killed by their parents.
The fertility rate of the population was 1 in 2023, according to the World Bank. That’s about half the 2.1 level needed to maintain the country’s population — known as the “replacement level”.
China’s economic rise since the 1980s has been underpinned by a vast, youthful labour force that enabled large-scale manufacturing, infrastructure-led growth, and competitive export industries which transformed it from an impoverished nation into a major global economic power — also known as the Chinese Economic Miracle.
If the working-age population continues to narrow, China may find it more difficult to maintain high growth and support a rapidly ageing society over the next half-century.
While the government moves to make contraception more expensive, critics nonetheless fear the effect on the spread of sexually transmitted diseases. Others have argued that the policy is insufficient when the cost of raising a child in China is still a barrier for many prospective parents. According to a report released by the YuWa Population Research Institute in 2024, the average cost of raising a child in China until the age of 18 is 538,000 yuan (€65,484) — making it one of the most expensive countries for parents.
