Today’s Focus: Does China’s childcare subsidy serve a different purpose since it does not stimulate fertility for the workforce? China’s manufacturing industry declined again in July, experts warned of structural crisis hard to recover. US-South Korea trade agreement reached, with South Korea increasing investment to receive tariff benefits.
Recently, the CCP introduced a childcare subsidy. Many people believe that this subsidy cannot provide real help to childbearing families or stimulate fertility. They are puzzled about why the authorities would implement such a policy. Some analysis suggests that the subsidy is just a facade, and behind it is a power play between the high-level officials and the common people. What is really going on?
On July 28, the CCP released the “National Childcare Subsidy System Implementation Plan,” which stipulates that starting from January 1, 2025, regardless of whether families have one child, two children, or three children, each child under the age of 3 can receive an annual subsidy of 3,600 yuan (RMB), equivalent to 300 yuan per month.
Doesn’t this policy sound good? However, many people believe that this amount cannot alleviate the current trend of young people being hesitant or unwilling to have children.
In interviews conducted by digital influencer and Tencent News special contributor “Peng Circle” with both already parenthood and aspiring parenthood young individuals working in big cities, they shared their views on raising children.
Li Yan, a private white-collar worker in Beijing, shared that she’s over 35 years old but still hesitant to have a child because she and her husband have nearly ten thousand yuan in monthly mortgage payments. On top of their tight financial situation, her husband was recently laid off, making their income even more unstable. The prospect of pregnancy and raising a child would not only bring significant financial pressure but also the risk of losing a job. Moreover, their elderly and frail parents cannot help take care of the child, leading to her reluctance to have children.
Shi Shi, working in an internet company, mentioned that due to the difficulty in registering at public hospitals, she had to opt for delivery at a private hospital. Her premature child had to stay in an incubator for a week, resulting in total expenses exceeding 300,000 yuan. The medical insurance only reimbursed tens of thousands. Feeling overwhelmed, she wanted to switch to a public hospital to cut costs but had nowhere to turn. Faced with daily bills of thousands or even tens of thousands of yuan, she felt helpless.
Wang Chen, who works in the media, discovered after having a child that even with social insurance, she faced significant expenses and challenges. She and her husband continued working, relying on her in-laws to help look after the child in Beijing. Unable to accommodate them at home, they had to rent an additional room in a shared apartment, paying an additional monthly rent of 3,000 yuan. This added to her stress due to mortgage payments. When her mother-in-law fell ill and couldn’t care for the child, Wang Chen had to hire a childcare helper at a cost of 6,500 yuan per month, nearly half of her salary. She expressed how difficult it is to raise children.
From these examples, it’s evident that a monthly subsidy of 300 yuan cannot provide substantial help to childbearing families.
If the subsidy cannot provide aid, why does the government still introduce it? What calculations are behind this?
A viewpoint by blogger “Converser” is worth pondering. He mentioned that in China, there exists a complex scenario: “10 million newborns are considered too few, while 10 million college students are deemed too many.” What does this indicate? China does not lack labor force; hence, the encouragement for fertility by the government serves another purpose.
“Converser” explained that newborns are considered “premium consumers” since birth, and can immediately stimulate dozens of industry chains, such as milk powder, diapers, children’s clothing, toys, early education, kindergartens, school district homes, etc. This forms a binding consumption chain lasting 18 to over 20 years. Even if the government halts all subsidies after a child’s birth, such consumption would not cease since you “cannot stuff the child back.”
More importantly, children serve a vital role in maintaining stability. “Converser” analyzed that the core logic behind the childcare subsidy is for the authorities to encourage childbirth to boost consumption and activate the economy. However, the deeper objective is that children are the family’s “soft spot” and the best “social stability tool.” He emphasized that non-parents are more impulsive than parents. Given the backdrop of China’s economic decline, frequent negative social incidents, and increasing social stability expenditures, children deter adults from acting recklessly, thereby achieving the goal of “stabilizing society.” Hence, the government still rolled out this subsidy amidst tremendous fiscal pressure, demonstrating their emphasis on “stabilizing society.”
“Converser” further stated that this seemingly “beneficial for families” subsidy policy is the beginning of a social game. Consider that 3,600 yuan cannot stimulate fertility, but this serves as a trial by the CCP.
He likened society to a pyramid, where the top holds the resources of a minority elite, while the bottom is the common people. In the past few decades, the elite controlled most of society’s resources, while the base had limited income, yet the “stability of the pyramid relies on the base.” When the base becomes unstable, the top considers redistributing resources. If the people choose “not to have children” despite the subsidy, policies will continue to adjust, increasing subsidy amounts or extending subsidy periods. Essentially, the benefits people obtain depend on whether the “base is sufficiently unified.” The recent announcement by the State Council to gradually implement free preschool education and other measures demonstrates that the individuals at the “top” are feeling the pressure.
Therefore, currently, it’s not families needing children but rather society that needs children, with those at the top of the pyramid requiring children.
On July 31, the National Bureau of Statistics of the CCP released the Purchasing Managers’ Index (PMI) for July, indicating the state of the manufacturing industry. The data revealed that China’s manufacturing sector continued to contract, with the PMI dropping to 49.3, down 0.4 points from June, marking the fourth consecutive month below the 50 mark, indicating contraction in the manufacturing sector.
Simultaneously, the non-manufacturing business activity index stood at 50.1, slightly lower than the expected value of 50.2.
Of note, the production index for July decreased to 50.5, the new order index dropped from 50.2 in June to 49.4, and the new export order index declined from 47.7 in June to 47.1 in July.
US economist Davy J. Wong, speaking to Epoch Times, stated that this is not a cyclical fluctuation but rather signals a structural problem within the Chinese economic model. He believed that China’s manufacturing sector is entering a phase of systemic decline.
Recently, there has been a wave of factory closures in the Pearl River Delta region, with reports of numerous factories ceasing operations or sending employees on leave, including prominent companies like Hong Kong-funded company Yifeng Sports Technology, Canadian-owned company Tianhong Technology, and semiconductor leader Wuzhu Electronics with nearly 6,000 employees and annual revenue previously reaching 1.5 billion.
Sun Guoxiang, a professor at the Department of International Affairs and Business at Nanhua University in Taiwan, highlighted that despite the temporary cessation of the US-China tariff war following negotiations in Geneva, the wave of factory closures in Dongguan and the Pearl River Delta region indicates a structural blow inflicted by tariffs on Chinese exports and the manufacturing industry. This impact continues to exacerbate.
Wong mentioned that the paused tariff war is more of a technical respite under high-level maneuvers rather than substantial structural improvement, attributing factory closures in the Pearl River Delta to internal systemic divergence and the effects of dwindling foreign exchange economic environment and reduced orders.
Additionally, the US-China tariff agreement is set to expire in mid-August, with differences emerging between the US and China on extending the “truce.” After the third round of talks on July 29, the CCP claimed a consensus was reached on an extension, but the US side stated that the decision on extension requires the president’s approval.
Simultaneously, a recent survey by the CCP’s central bank revealed that Chinese families hold increasingly pessimistic economic expectations for the future and confidence in the job market has fallen to historic lows.
Despite the CCP’s announcement during a Political Bureau meeting on July 30 that they would stimulate domestic demand in the second half of the year, no effective measures tackling overcapacity issues were presented, nor were robust anti-monopoly actions articulated.
Sun Guoxiang warned that if robust policy interventions are not implemented in the coming months or if there isn’t a significant rebound in external demand, China’s export and manufacturing industries will continue to languish.
On Wednesday, July 30, US President Trump posted on Truth Social, claiming that the US and South Korea had reached a new trade agreement. According to the deal, the US will impose a 15% tariff on Korean exports, while South Korea will invest up to $350 billion in the US and fully open its markets, purchasing around $100 billion worth of US goods, including energy resources such as liquefied natural gas.
South Korean President Lee Jaemyung posted on Facebook, mentioning after soliciting various opinions and refining their strategy, they have finalized negotiations with the US. He emphasized that the massive $350 billion investment will focus on key South Korean industries like semiconductors, shipbuilding, biotechnology, and new energy, aiming to strengthen South Korea-US industrial cooperation and alliance.
While the US initially planned to impose a 25% tariff on South Korea starting from August 1, successful negotiations between the US and South Korea led to a reduced tariff of 15%, relieving many South Korean businesses and citizens.
Source: Central News Agency
Miss Zheng, a self-employed individual, expressed relief upon seeing the tariff reduction from 25% to 15%, coupled with reports suggesting that most of South Korea’s promised $350 billion investment in the US are in the form of loans or guarantees, alleviating concerns of a significant financial burden on South Korea’s finances.
Lee Jeong-hwan, a professor at the Department of Economics and Finance at Hanyang University, viewed the US-South Korea tariff agreement positively. He believed that South Korea secured tariff levels similar to those of Japan and the European Union, obtaining tariff reductions or most favored nation treatment for crucial industries like automobiles and semiconductors. They also managed to protect sensitive markets like rice and beef, avoiding significant losses. He stressed that the focal point would now be on realizing the promised $350 billion investment in the US.
However, there are concerns from some scholars about the outlook of certain industries.
Professor Lee Ha-geon from Daedeok University’s Future Automotive Department pointed out that although both Japan and South Korea currently face 15% tariffs on automobiles, Japan had a preexisting 2.5% tariff on car exports to the US, while Korea had none. This implies that the added tariff will increase costs for Korean car manufacturers by 2.5%, potentially impacting their price competitiveness. Additionally, a 15% tariff on automobile parts will exert pressure on the industry.
Lee analyzed that with the raised import tariffs by the US, the market share of imported cars in America is likely to decrease. Consequently, car manufacturers like Hyundai and Kia from South Korea will need to compete with manufacturers from other countries. As a result, car sales in the latter half of this year may not perform as well as before.
As of now, the US is still in negotiations with major trading partners like Canada, Mexico, and others. It is expected that more updates will emerge before the tariff adjustment deadline on August 1.
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