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BEIJING -- China on Monday introduced a nationwide childcare subsidy program starting in 2025, as part of broader efforts to support families and encourage childbirth.

The program will offer families 3,600 yuan (about 503 U.S. dollars) per year for each child under the age of three.

The subsidies will be exempt from individual income tax and will not be counted as household or individual income when identifying assistance recipients, such as those receiving subsistence allowances or classified as living in extreme difficulty.

The policy is expected to benefit more than 20 million families each year.

"International practices show that cash subsidies is an indispensible part of pro-birth measures," said Zhang Benbo, a researcher at a think tank under the National Development and Reform Commission.

Song Jian, a professor at Renmin University of China, noted that most developed countries that entered low-fertility stages earlier have adopted similar childcare subsidy schemes.

As one of the world's most populous countries, China is facing a dual demographic challenge: a shrinking number of newborns and a rapidly aging population.

The country's birth rate and total number of newborns declined for seven consecutive years before experiencing a modest rebound in 2024. Meanwhile, China's population aged 60 and above had reached 310 million by the end of last year.

In response to this dual challenge, China has steadily loosened its family planning policies over the past decade. It phased out its one-child policy by allowing married couples to have two children in 2016, and announced support for couples wishing to have a third child in 2021.

The national childcare subsidy was first introduced in this year's annual government work report in March.

Multiple local governments have piloted similar programs over the last few years -- some of which have offered notably generous incentives -- as part of their own efforts to address these challenges.

Hohhot, the capital of north China's Inner Mongolia Autonomous Region, grants one-time subsidy of 10,000 yuan for the first child in each family. A second child receives an annual subsidy of 10,000 yuan until the age of five, and any further children are eligible for the same amount annually until the age of 10.

Shenyang, the capital of northeast China's Liaoning Province, provides a monthly subsidy of 500 yuan to local families with a third child until that child turns three.

"When our third child was born, community workers came to our home to remind us to apply for the birth subsidy. We often joke that the baby came with a salary," said Wang Lei, a mother of three from Yinchuan, northwest China's Ningxia Hui Autonomous Region.

Notably, Panzhihua in southwest China's Sichuan Province -- the first city in China to offer such subsidies -- has witnessed positive growth in its permanent resident population for four consecutive years.

Meanwhile, the county-level city of Tianmen in central China's Hubei Province saw a year-on-year increase of 17 percent in its newborn population in 2024 -- significantly higher than the national average of 5.8 percent, and ending an eight-year decline. Among the 7,217 newborns in Tianmen last year, more than half were second or third children.

"Although the subsidies couldn't cover all childcare costs, they help with essentials like baby formula and diapers, easing the financial burden," said Ma Ying, a mother in Guyuan, Ningxia.

Yang Yiyong, a researcher at the Academy of Macroeconomic Research, noted that recent pro-birth policies are beginning to show early results, and that a more supportive work environment and better job opportunities for women have also helped improve fertility plans.

Mao Zhuoyan, a professor at Capital University of Economics and Business, said that while the childcare subsidy is a key step toward easing the burdens on families, providing reassurance about having children, and optimizing the population structure, it is not a cure-all.

Mao stressed the importance of integrating it with other measures such as parental leave, childcare services, education, and housing to avoid limited impact from isolated efforts.

In a separate move, China's central government last Friday issued a directive urging local governments to draw detailed plans to introduce free preschool education.

The government is also ramping up nursery care services for children under three, aiming to relieve the pressures on working parents and improve early childhood development.